IRARY 
rsity  of 
ifornla 
vine 


tegp  p 


INCOME 


THE  MACMILLAN  COMPANY 

MIW   YORK   •   BOSTON   •   CHICAGO    •   DALLAS 
ATLANTA    •    SAN   FRANCISCO 

MACMILLAN  &  CO.,  LIMITED 

LONDON   •  BOMBAY   •  CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  LTD. 

TORONTO 


INCOME 


AN  EXAMINATION  OF  THE  RETURNS  FOR 

SERVICES  RENDERED   AND   FROM 

PROPERTY  OWNED  IN  THE 

UNITED   STATES 


BY 

SCOTT  NEARING,  PH.D. 

WHARTON  SCHOOL,  UNIVERSITY  OF  PENNSYLVANIA 

AUTHOR  OF  "  WAGES  IN  THE  UNITED  STATES,"  "  FINANCING 

THE  WAGE  EARNER'S  FAMILY,"  "  REDUCING 

THE  COST  OF  LIVING,"  ETC. 


THE  MACMILLAN  COMPANY 

1915 

AU  rights  reserved 


COPYRIGHT,  1915, 
BY  THE  MACMILLAN  COMPANY. 


Set  up  and  electrotyped.    Published  May,  1915.     Reprinted 
September,  1915. 


NortoooB  Iptcsa : 
Berwick  &  Smith  Co.,  Norwood,  Mass.,  U.S.A. 


DEDICATED  TO  THREE  MEN  WHO  GRASP 
THE  REAL  SIGNIFICANCE  OF  THE 
CONFLICT  BETWEEN  SERVICE  AND 
PROPERTY  INCOME,— 

JOSEPH  E.  COHEN, 

J.  A.  HOBSON, 
EDWIN  CANNAN. 


PREFACE 

AMONG  all  of  the  basic  principles  of  economic  life, 
none  is  more  vital  than  this — that  every  able-bodied 
adult  should  have  a  job;  that  he  should  work  at  the 
thing  for  which  he  is  best  suited  and  best  fitted;  and 
that  he  should  be  paid  the  full  value  of  what  he  pro- 
duces. VSociety  is  built  upon  the  idea  that  the  people 
who  can  shall  contribute  their  tune  and  energy  to  the 
advancement  of  those  things  in  which  society  has  an 
interest. 

Modern  economic  discussions  are  being  turned 
toward  the  conservation  of  human  values.  Thinking 
men  realize  that  the  wealth  of  nations  rests  upon 
the  fiber  of  the  people;  that  the  progress  of  civilization 
is  built  out  of  service. 

Service  is  of  preeminent  importance.  In  the  home, 
in  the  street,  in  the  shop,  in  the  mine,  on  the  railroad, 
the  greatest  single  law  of  life  is  the  law  of  service — 
doing  for  others  and  sharing  with  others  the  burdens 
and  rewards  of  effort.  The  work  of  the  world,  directed 
and  performed  by  the  hand  of  man,  should  have  as  its 
final  object  the  greatest  service  to  mankind,  or,  as 
Ruskin  put  it,  "the  largest  number  of  happy  and 
healthy  human  beings."  Above  the  rights  of  property 
there  must  be  placed  the  rights  of  humanity. 

The  industrial  system,  like  every  other  social  insti- 
tution, must  serve  the  human  race,  and  serve  it  effi- 
ciently. To-day  some  of  the  chief  questions  of  eco- 

vfi 


Vlll  PREFACE 

nomics  involve  the  method  of  apportioning  income. 
Shall  the  values  created  by  industry  go  to  those  who 
serve?  There  seems  to  be  no  other  basis  upon  which 
economic  society  may  finally  rest. 

An  effective  system  of  income  distribution  will 
recognize  service  as  the  greatest  economic  asset;  will 
reward  service  with  the  values  that  service  creates. 
Until  those  who  serve  receive  a  return  equal  to  the 
value  of  their  service,  the  questions  of  income  dis- 
tribution can  never  be  settled,  because  until  then  they 
never  can  be  settled  right. 

SCOTT  NEAEING. 
UNIVERSITY  OF  PENNSYLVANIA, 
March  12, 1915. 


CONTENTS 


INTRODUCTION 

THE  MEANING  OF  INCOME 
SECTION  PAGE 

I.     Personal  or  Material.        .         .         .         .         .         .       xv 

II.    Income  as  Purchasing  Power xx 

III.    Wages,  Standards  and  Incomes          ....     xxv 


CHAPTER  I 

THE  WHENCE  AND  THE  WHY  OF  INCOME 

I.    The  Relation  of  Income  to  Effort       .         .         .  .  i 

II.     Money  as  Income    .......  3 

HI.    The  Sources  from  which  Income  is  Derived          .  .  4 

IV.     The  Productive  Processes  and  Economic  Wealth  .  10 

V.     The  Monopoly  Power  of  Ownership  .          .          .  .11 

VI.    The  Monopoly  Principle  Applied  to  Capital        .  .  14 

\TI.    Labor  Monopoly  as  a  Determiner  of  Wages        .  .  15 


CHAPTER  n 

SERVICE  INCOME  AND  PROPERTY  INCOME 

I.    Income  and  Special  Privilege     .....  18 
II.     Service  vs.  Property  Ownership          .         .         .         .22 

III.  The  Basic  Income  Question       .....  26 

IV.  The  Answer  for  Transportation  Agencies    ...  30 
V.    The  Answer  for  Municipal  Utilities             ...  38 

VI.    The  Answer  for  Manufacturing  Industries           .         .  40 

VII.     Mining,  Smelting,  and  Refining          ....  48 

VIII.     Service  and  Property  Incomes            .                  .         .  51 

ix 


X  CONTENTS 

CHAPTER  HI 

THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES 
SECTION  PAGE 

I.    The  Treatment  of  Service  Income      •         •         •         •       S3 
II.     Gainful  Occupations  in  the  United  States  54 

III.  Some  Distinctions  between  the  Recipients  of  Service 

Income        ........       60 

IV.  One-Man  Industry 60 

V.    The  Distribution  of  Occupations  in  Organized  Industry      63 

VI.    The  Possibilities  of  a  Service  Income  Study        .         .       67 

CHAPTER  IV 

SERVICE  INCOME  IN  ORGANIZED  INDUSTRY 

L    Salaries  and  Wages 70 

13.    The  Incomes  of  Managers,  Foremen,  and  Other  Under 

Officers 75 

HI.    The  Incomes  of  Clerks 78 

IV.    The  Incomes  of  Wage  Earners  in  Transportation  and 

Commerce 82 

V.    The  Incomes  of  Wage  Earners  in  the  Mercantile  Indus- 
try        .86 

VI.    The  Incomes  of  Wage  Earners  in  Certain  Manufactur- 
ing Industries 88 

VII.    Wage  Rates  in  the  Manufacturing  Industries,  reported 

by  Certain  States  and  by  the  United  States  Census      98 
VIII.     The  Incomes  of  Wage  Earners  Engaged  by  Public  Utili- 
ties      101 

IX.    The  Wage  Rates  for  Mines  and  Quarries    .         .         .     102 
X.    Service  Incomes  in  Organized  Industry       .         .         .     105 

CHAPTER  V 

THE  POSSIBILITIES  OF  PROPERTY  INCOME   IN  THE  UNITED  STATES 

I.    The  Impersonal  Nature  of  Property  Income  Data        .     108 
II.    New  Light  on  Property  Income         .         .         .         .no 


CONTENTS  XI 

SECTION  PAGE 

III.  Stabilizing  Business .         .         .         .         .         .         .     in 

IV.  Corporation  Accounting, — An  Open  Sesame  to  Busi- 

ness Facts    ........     113 

V.    A  New  Form  for  Expressing  Wealth  .         .         .         .115 

VI.    The  Movement  toward  Concrete  Property  Valuation  .     117 
VII.    Property  Income  Possibilities    .         .         .         .         .119 

VIII.     Income- Yielding  Property  in  the  United  States  .         .121 

CHAPTER  VI 

PROPERTY  INCOME  ACTUALLY  PAID  IN  THE  UNITED  STATES 

I.  Property  on  Which  Income  is  Paid    .         .         .         .131 

II.  The  Basis  for  Computing  Property  Incomes        .         .     133 

III.  Where  Do  Industrial  Values  Go?       .-  136 

IV.  The  Corporation  Tax  Returns  ....     138 
V.  An  Estimate  of  Dividend  Payments            .         .         .     141 

VI.    The  Results  of  the  Corporation  Tax  Figures        .         .     147 
VII.     Some  Additions  to  the  Commissioner's  Figures    .         .     148 

CHAPTER  VII 

PROPERTY  INCOME  AND  THE  PRODUCERS   OF  WEALTH 

I.  The  Property  Service  Contrast  ....     154 

II.  The  Importunity  of  the  Problem        .         .         .         .     155 

III.  The  Priority  of  Property  Income       .         .         .  159 

IV.  The  Stability  of  Property  Income       .          .          .          .162 

V.  The  Permanence  of  Property  Income         ..       .«         .     165 
VI.  The  Tendency  of  Property  Income  to  Concentrate       .     168 

VII.  The  Position  of  the  Producers 170 

V1I1.  The  Paucity  of  Service  Income          ....  172 

IX.  The  Social  Insufficiency  of  Service  Income  .         .  173 

X.  The  Economic  Inadequacy  of  Service  Income      .         .  177 

XI.  The  Rigidity  of  Sendee  Income          .         .         .         .  181 

XII.  The  Instability  of  Service  Income      ....  184 

XIII.  The  Superior  "Right"  to  Property  Income         .         .  185 

XIV.  A  Survey  of  the  Field 100 

XV.  The  Future  of  the  Issue 199 


Xll  CONTENTS 


STATISTICAL  TABLES  APPEARING  IN  THE  TEXT 

TABLE  PAGE 

I.    Operating  Rail  Revenues,  Total  Compensation  and  To- 
tal Interest  and  Dividends,  for  Class  I  Roads  and  for 

All  Operating  Roads,  1911 33 

II.  Operating  Revenues,  Total  Compensation  and  Total 
Interests  and  Dividends  for  Certain  Railroad  Sys- 
tems, 1911  and  1912  ......  34 

III.  Ratio  of  Gross  Income  to  Property  Income  and  to  Sur- 

plus in  Certain  Representative  Industries         .         .       47 

IV.  Number  and  Percentage  of  Gainfully  Occupied  Per- 

sons in  the  United  States,  Engaged  in  Each  General 
Group  of  Gainful  Occupations,  1910        •         •         •       55 
V.     Gainfully  Occupied  Persons  in  Manufacturing  and  Me- 
chanical Pursuits,  Grouped  According  to  the  Char- 
acter of  Occupations,  1910 56 

VI.  The  Industrial  Grouping  of  Persons  Engaged  in  Manu- 
factures, 1909 64 

VII.    The  Detailed  Industrial  Grouping  of  Persons  Engaged 

in  Four  Leading  Manufacturing  Industries,  1909      .       65 
VIII.     Earning  of  Women  in  the  Finishing  Department  of  the 

Glass  Industry     .......       96 

IX.    Weekly  Wages  Actually  Paid  in  Certain  Packing  Plants 

of  Chicago 97 

X.    Cumulative  Percentages  of  Adult  Males  Earning  Speci- 
fied Wage  Rates  .......     100 

XI.    Estimated  True  Value  of  All  Property  and  of  Specified 

Classes  of  Property,  1904       .         .         .         .         .122 

XII.    Detailed  Corporation  Tax  Returns  for  1913         .         .     140 
XIII.    Dividend  Payments  Estimated  on  Corporation  Tax  Re- 
turns   146 

XIV.    Increase  in  Population  and  in  Certain  Forms  of  Wealth, 

U.  S.,  1850  to  1910 157 


CONTENTS  X1U 


TABLE  OF  APPENDICES 

APPENDIX  PAGE 

I.  Wage  Rates  of  Males,  16  years  of  age  and  over,  in  all 
Industries  and  in  Certain  Industries  Employing 
more  than  25,000  Such  Males,  1905  .  .  .  203 
II.  Wage  Rates  of  Females,  16  years  of  age  and  over,  in 
all  Industries  and  in  Certain  Industries  Employing 
more  than  10,000  Such  Females,  1905  .  .  .  204 

III.  Wages  of  Females,  18  years  of  age  and  over,  in  Mas- 

sachusetts for  all  Industries  reporting  the  Employ- 
ment of  more  than  5,000  Such  Females,  1910         .     205 

IV.  Wages  of  Females,  16  years  of  age  and  over,  in  New 

Jersey  for  all  Industries  and  for  those  Industries  re- 
porting the  Employment  of  more  than  2,000  such 
Females,  1911    .......     206 

V.    Wages  of  Females,  16  years  and  over,  in  Oklahoma, 

engaged  in  all  Industries,  1911     ....     206 

VI.     Wages  of  Females,  16  years  of  age  and  over,  in  Kansas 
for  all  Industries  reporting  the  Employment  of  more 
than  100  Adult  Females      .....     207 

VII.     Wages  of  Females,  16  years  of  age  and  over,  in  Wis- 
consin, in  all  Industries  and  in  Industries  reporting 
the  Employment  of  more  than  1,000  Females,  1909    207 
VIII.    Wages  of  Females  in  California,  in  Manufacturing 

Establishments,  in  1911      .         .         .         .         .     208 

IX.    Wages  of  Females  in  California,  in  all  Establishments 
in  cities  reporting  the  Employment  of  more  than 
1,000  Females,  1911    .         .         .         .         .         .     208 

X.     Income  of  Wage  Earners — Railroads        .         .         .     209 
XI.     Average  Annual  and  Average  Hourly  Earnings  of 
Women  Wage  Earners  investigated  in  Retail  Stores, 
Classified  by  Weekly  Earnings     ....     210 

XII.  Per  Cent  of  Employees  Earning  each  Classified 
Amount  During  Week,  by  Sex  and  Age  Groups — 
Woolen  and  Worsted  Mills  and  Cotton  Mills  .  211 
XIII.  Wages  of  Males,  1 8  years  of  age  and  over,  in  Massachu- 
setts for  all  Industries  reporting  the  Employment  of 
more  than  5,000  Such  Males  ....  212 


XIV 


CONTENTS 


APPENDIX  PAGE 

XIV.    Wages  of  Males,  16  years  of  age  and  over,  in  New  Jer- 
sey for  all  Industries  reporting  the  Employment  of 
more  than  5,000  such  Males,  1911         .         .         .213 
XV.    Wage  Rates  of  Male  Wage-Earners,  16  years  of  age 
and  over,  Employed  in  all  Industries  of  Oklahoma 
and  in  those  Industries  reporting  the  Employment 
of  more  than  1,000  Males,  1911   ....     214 

XVI.     Wages  of  Males,  16  years  of  age  and  over,  in  Kansas 
for  all  Industries  reporting  the  Employment  of  more 
than  i, ooo  such  Males,  1911         ....     214 

XVII.    Wage  Rates  of  Males  in  Wisconsin,  in  all  Industries 
and  in  Industries  reporting  the   Employment  of 
more  than  5,000  Males,  1909        .         .         .         .215 

XVin.     Wage  Rates  of  Males  in  Manufacturing  Establish- 
ments in  California,  1911    .          .          .         .         .215 

XIX.     Wage  Rates  of  Males  in  All  Establishments  in  Cities 
of  California,  reporting  the  Employment  of  more 
than  2,000  Males,  1911        .....     216 

XX.     Establishments,  Wage-Earners,  and  Per  Cent  of  Total     217 
XXI.     Comparative   Summary  of  Railway  Employ6s,   by 
Class  and  per  100  Miles  of  Line  Operated,  1901  and 
1910          ........     218 

XXII.    Per  Cent  of  Total  Receipts  of  United  States  Steel 
Corporation  charged  to  each  Item  of  Expense  and 
Profit,  1902  to  1911    ......     219 

XXm.    Total  Expenditures  of  United  States  Steel  Corpora- 
tion for  Wages  and  Salaries  during  each  year  and 
balance  of  Undivided  Surplus  in  each  year  after 
Payment  of  Dividends         .          .         .          .         .220 

XXIV.  Product  and  Wages  Paid  for  those  Massachusetts  In- 
dustries reporting  a  product  valued  at  $10,000,000 
or  over  in  1910 221 


INTRODUCTION— THE  MEANING  OF 
INCOME 

7.  Personal  or  Material 

THE  questions  which  are  involved  in  any  considera- 
tion of  income  bear  a  peculiarly  intimate  relation  to 
every  man's  thinking.  All  people  depend  upon  in- 
come in  some  form.  All  are  involved  in  some  income- 
yielding  or  income-enjoying  pursuits.  At  one  time 
or  another  everyone  has  found  it  necessary  to  think 
about  income,  and  although  this  thinking  ordinarily 
takes  an  intensely  personal  form,  it  bears  all  of  the 
connotations  of  real  thought.  Since  no  one  can  escape 
the  subject,  all  are  more  or  less  familiar  with  it. 

While  no  hard  and  fast  definition  of  income  can  be 
written,  it  is  possible  to  begin  with  a  definition  which 
will  offer  a  satisfactory  working  basis  for  a  study 
of  American  conditions.  Income  may  be  viewed  either 
from  a  personal  or  a  material  standpoint.  Personally 
considered,  income  is  a  psychic  phenomenon.  People 
have  certain  wants  which  reveal  themselves  in  a 
desire  for  food,  shelter,  finery,  sight-seeing,  entertain- 
ment. These  wants  are  satisfied  by  the  use  of  goods 
and  services — bread,  overcoats,  lace,  travel,  and 
moving  pictures.  The  satisfactions  or  enjoyments 
secured  from  these  goods  and  services  constitute 
psychic  income. 

The  idea  of  psychic  income  has  been  stressed  in 
Europe  by  the  Austrians,  who  have  succeeded  in 

xv 


XVI  INTRODUCTION 

reading  into  political  economy  a  very  large  non- 
material  element.  It  has  likewise  been  made  the 
subject  of  wide-spread  discussion  in  America  by  such 
men  as  F.  A.  Fetter  and  Irving  Fisher,  as  well  as 
through  the  emphasis  which  Professor  Patten  has 
laid  on  consumption  as  the  logical  goal  of  economic 
endeavor.  Fetter  and  Fisher  call  attention  to  the 
subjective  or  personal  reactions  which  the  enjoyment 
of  economic  goods  and  services  affords.  Professor 
Patten  points  to  the  fact  that  consumption  is  the 
logical  goal  of  production,  and  that  therefore  the 
study  of  political  economy,  far  from  ending  with 
the  processes  of  wealth  creation,  really  centers  about 
the  use  of  wealth,  or  consumption.  Although  their 
objective  point  is  somewhat  different,  the  two  lines  of 
arguments  are  essentially  parallel.  Both  emphasize 
the  psychic  basis  of  income  as  existing  in  the  satisfac- 
tions derived  from  consumption. 

The  concept  of  income  as  a  psychic  phenomenon  is 
probably  carried  into  the  realm  of  economic  discus- 
sion more  thoroughly  by  Professor  Fetter  than  by 
any  other  American  economist.  His  viewpoint  is 
epitomized  in  one  chapter  of  his  "Principles"  (chap- 
ter 6.)  1  Heading  the  chapter  "Psychic  Income,"  and 
dividing  it  into  two  parts,  one  dealing  with  "Income 
as  a  flow  of  goods"  and  the  other  with  "Income  as  a 
series  of  gratifications,"  Professor  Fetter  restates,  in 
admirable  terms,  the  well-known  arguments  in  favor 
of  dealing  with  the  "subjective"  or  personal  relations 
of  income,  rather  than  with  the  "objective"  or  ma- 
terial relations. 

1  "Principles  of  Economics,"  F.  A.  Fetter,  New  York,  The  Century 
Co.,  1905. 


INTRODUCTION  XVU 

Professor  Fisher  devoted  a  considerable  portion  of 
his  book  on  capital  and  income  1  to  a  statement  of 
the  arguments  in  favor  of  regarding  income  as  a 
"psychic  stream  of  events."  2  Professor  Fisher  uses 
the  terms  "subjective"  and  "objective"  to  differen- 
tiate the  two  kinds  of  income.  "The  two  kinds  of 
final  income,  the  physical  and  the  psychical,  are  both 
legitimate  in  then*  proper  spheres.  Usually  the  phys- 
ical and  the  psychical  are  equal  to  each  other  in 
value."3  Psychic  income  is  the  final  fprmthat  income 
must  take,  however.  {iThe  result  has  been"  lto  ieacT 
us  inevitably  to  the  psychic  stream  of  events  as 
final  income,  all  of  the  agreeable  items  being  on  the 
credit  side,  and  the  disagreeable  ones  on  the  debit 
side."  4 

Theoretically,  the  emphasis  laid  upon  psychic  in- 
come seems  to  be  justified.  Practically,  it  is  impos- 
sible, at  least  in  the  present  stage  of  human  knowledge, 

jind  any  satisfactory  measure  for  psychic  values. 
Therefore  while  the  psychic  concept  aitords  an  ex- 
cellent  basis  for  theoretical  analysis  and  synthesis, 
it  is  in  no  sense  a  point  of  departure  for  the  study  of 
income  facts. 

There  have  appeared,  up  to  the  present  time,  a 
number  of  treatises  dealing  with  the  theoretical  as- 
pects of  the  income  problem.  Among  the  long  list 
of  such  books,  the  reader  is  astonished  at  the  com- 
parative dearth  of  facts.  Theories  have  been  multi- 
plied; explanation  has  succeeded  explanation;  hy- 
pothesis has  been  heaped  upon  hypothesis;  yet  when 

1  "The  Nature  of  Capital  and  Income,"  Irving  Fisher.    New  York, 
The  Macmillan  Co.,  1906. 

2  Ibid,  p.  177.  *  Ibid,  p.  169.  4  Ibid,  p.  177. 


XV111  INTRODUCTION 

all  is  said,  the  theorists  are  no  nearer  a  substantiation 
of  their  theories.  A  new  income  studs^-tQ— iii&tifv 
itself,  must  therefore  present  an  array  of  facts  rather 


Practically  there  is  no  way  in  which  psychk,  value 
can  be  measured  or  popularly  interpreted  -O]he  inves- 
tigator who  is  interested  in  the  facts  bearing  on  income 
is  necessarily  forced  back  to  a  consideration  of  goods 

id  services  as  a  much  more  tangible  income  measure. 
Even  goods  and  services  are  an  inadequate  measure' 
for  income  because  so  many  of  them  are  rendered 
jratis. 

Tertain  goods  and  services  can  be  measured.  The 
clothes  which  a  man  buys  at  the  store;  the  coal  which 
he  purchases;  the  food  which  comes  from  the  huckster 
and  the  grocer;  and  the  building  in  which  he  lives  are 
tangible  parts  of  income.  These  things  can  be  valued 
in  terms  of  a  common  value  denominator. 

There  are,  on  the  other  hand,  a  vast  number  of 
goods  and  services  which  are  derived  in  a  less  direct 
and  far  more  inscrutable  manner.  These  goods  and 
services  constitute  an  essential  element  in  psychic 
income;  yet  they  are  hi  their  very  nature  unmeasured, 
and  for  the  most  part,  unmeasurable.  Most  families 
enjoy  an  income  of  goods  which  are  domestically 
produced.  The  family  in  a  small  town  has  its  kitchen 
garden,  and  its  domestic  animals;  the  wife  contributes 
the  cooking  of  food,  and  the  making  of  clothes.  Be- 
sides these  common  home  industries,  there  are  nu- 
merous other  special  forms  in  which  families  provide 
themselves  directly  with  the  things  which  they  need. 
The  same  holds  true  of  services  which  are  secured 
through  the  family.  At  all  times,  the  domestic 


INTRODUCTION  XIX 

workers,  usually  the  women  of  the  family,  render 
services  to  the  entire  household  for  which  they  are 
never  compensated.  These  services  are  the  essential 
element  in  real  household  income,  yet  they  are  of 
such  a  nature  as  to  be  extremely  difficult  of  measure- 
ment. In  the  same  class  are  the  services  which  are 
rendered  by  the  members  of  a  family  or  by  friends 
during  ill-health  or  disability  of  any  kind.  Again, 
there  is  the  great  body  of  public  services.  The  streets 
are  paved,  lighted,  and  safeguarded.  Resources  are 
conserved,  public  hospitals,  schools,  and  similar  insti- 
tutions are  maintained.  In  scores  of  ways  the  com- 
munity adds  to  the  income  of  its  citizens.  To  be 
sure,  the  taxes  paid  directly  or  indirectly  by  the  citi- 
zens are  the  basis  for  this  income.  Nevertheless,  the 
income  as  well  as  the  taxes  are  parcelled  out  very  un- 
equally, and  there  is  no  immediate  relation  between 
the  tax  paid  and  the  income  received. 

Professor  Smart  goes  even  further  in  his  analysis 
of  those  income  items  "which  escape  both  notice  and 
assessment."  *  He  mentions  in  this  connection: 

(1)  Unpaid  services,  particularly  those  of  women. 

(2)  Growing  leisure,  where  work  is  hard  and  un- 
congenial. 

(3)  Congenial   occupation   as   a   wealth   in   itself 
apart  from  its  product. 

(4)  Personal  relations  as  a  by-product. 

(5)  New  kinds  of  goods  and  improved  quality  not 
represented  in  price. 

(6)  Property  yielding  no  revenue  and  general  re- 
construction of  environment. 

1  "The  Distribution  of  Income,"  Wm.  Smart.  London,  Macmillan 
&  Company,  1899,  Chapter  XI. 


XX  INTRODUCTION 

(7)  Freedom  and  good  government. 
Professor  Smart  has  listed  forms  of  services  not  or- 
dinarily thought  of  as  income,  yet,  since  they  play  an 
essential  part  in  creating  satisfactions,  they  may  be 
justly  so  considered. 

Income  in  the  form  of  goods  and  services  is  of  two 
clearly  marked  kinds — that  which  may  be  computed 
in  terms  of  practical  bookkeeping,  and  that  which 
may  not  be  so  computed,  because  there  is  no  prac- 
ticable way  in  which  the  values  can  be  measured. 
Both  the  unmeasurable  and  the  measurable  factors 
constitute  an  essential  part  of  income,  yet  it  is  im- 
possible in  the  present  stage  of  economic  science  to 
say  what  part. 

A  student  of  income  facts  must  confine  his  ac- 
tivities largely  to  searching  out  such  data  as  appears 
in  the  bookkeeping  variety  of  goods-and-services- 
income.  However  alluring  the  more  theoretical  phases 
of  the  subject  may  be,  they  must  necessarily  be  left 
to  the  treatise  on  theory. 

//.  Income  as  Purchasing  Power 

The  obvious  limitations  on  the  use  of  "income"  as 
denoting  a  flow  of  goods  and  services  to  a  consumer, 
lead,  perforce,  to  the  discussion  of  income  in  the  most 
practical  of  all  terms — the  terms  of  purchasing  power. 
Psychic  satisfactions,  units  available  for  consumption, 
and  goods  and  services,  are  all  far  more  complete 
income-measures.  Each  would  provide  an  admirable 
basis  for  an  income  analysis,  yet  no  one  of  them 
will  stand  the  test  of  practicability  in  a  study  of  in- 
come facts. 


INTRODUCTION  XXI 

A  simple  diagram  will  clarify  the  discussion. 


Flow  of 
goods  and 


Psychic 
reactions. 


The  psychic  reactions,  the  objective  point  and  the 
resultant  of  all  forms  of  income,  are  undoubtedly  the 
logical  subject  of  income  study.  Present-day  metrics 
afford  no  accurate  measure  of  psychic  enjoyments, 
hence  the  economist  has  sought  to  define  income  in 
terms  of  the  flow  of  goods  and  services  which  leads  to 
these  psychic  enjoyments.  Even  that  definition  will 
not  afford  a  working  basis  for  a  fact  study  of  income, 
because  the  goods  and  services  are  derived  from  two 
sources.  The  first,  including  the  social  and  economic 
advantages  for  which  no  money  equivalent  is  paid, 
or  can  be  computed;  the  second  including  that  pur- 
chasing power,  or  exchange  value,  which  is  definitely 
measurable.  It  is  in  terms  of  this  last  category  that 
a  fact  study  of  income  must  be  made.  The  other 
income  forms  "which  escape  both  notice  and  assess- 
ment," may  be  large  or  small  in  amount,  and  in  pro- 


XX11  INTRODUCTION 

portion.  From  their  very  nature,  they  can  form  no 
part  of  an  income  fact  study. 

The  resort  to  a  definition  of  income  in  terms  of 
purchasing  power  is  necessitated,  in  a  study  of  income 
facts,  not  only  by  the  impossibilities  of  accurately 
limiting  the  meaning  of  income,  but  likewise  by  the 
general  practices  of  the  community.  Among  the 
men  and  women  who  carry  on  the  transactions  of  the 
world,  the  term  "income"  means  neither  satisfactions 
nor  consumptions  units.  When  they  say  "income," 
they  mean  money  which  may  be  spent  for  goods  and 
services.  The  man  on  the  street  interprets  "income" 
to  mean  "purchasing  power."  Accounts  are  kept 
with  the  same  thought  in  mind.  Since  the  individuals 
in  present-day  society  secure  their  living  by  exchang- 
ing money  for  commodities,  they  naturally  fall  into 
the  habit  of  speaking  of  the  money  available  for  ex- 
penditures as  income.  Bookkeeping  and  the  common 
experiences  of  life  alike  point  to  a  definition  of  income 
in  terms  of  purchasing  power. 

Even  when  denned  as  purchasing  power,  the  term 
"income"  is  not  yet  free  from  serious  limitations. 
Professor  Cannan  in  a  book  which  strikes  perhaps  the 
newest  note  in  the  income  discussion,  contributes  a 
chapter  on  "Continuous  Power  to  Demand,  or  In- 
come," 1  in  which  he  lays  great  stress  upon  this  fact. 
He  writes:  "In  order  that  any  person  or  institution 
may  be  able  to  control  production  continuously  by 
means  of  demand,  it  is  necessary  that  he  or  it  should 
have  a  continuous  supply  of  money  to  spend.  Such  a 
continuous  supply  is  provided,  not  perhaps  exclusively 
but  at  any  rate  principally,  by  'income/  in  the  sense 

1  "Wealth,"  Edwin  Cannan,  London.  P.  S.  King  &  Son,  1914. 


INTRODUCTION  XX111 

in  which  that  word  is  ordinarily  used."  *  After  point- 
ing out  the  development  of  income  relations  with  the 
growth  of  the  modern  productive  system,  and  the 
necessary  changes  which  these  developments  bring 
about  in  the  popular  feeling  toward  income,  Professor 
Cannan  seeks  to  limit  his  discussion  to  a  regular  flow 
of  goods.  "The  term  income,"  he  says,  "as  com- 
monly used  includes  in  addition  to  money-income  an 
estimate  of  the  money-value  of  incomings  of  such 
other  commodities  and  services  as  are  ordinarily, 
bought  and  sold  and  can  consequently  be  valued  with 
substantial  accuracy."  2  Here  the  measurability,  and 
not  the  intrinsic  characteristic,  is  made  the  criterion 
of  judgment. 

There  are  still  other  limitations  on  the  use  of  the 
term  "income"  that  cannot  be  passed  over.  Even 
the  money  does  not  take  upon  itself  the  characteristics 
of  income,  according  to  Professor  Carman's  concept 
of  the  term,  unless  its  receipt  be  fairly  regular.  "No 
one  thinks  of  including  what  he  inherits  or  receives 
by  bequest  in  a  statement  of  his  income.  The  reason 
for  this  seems  to  be  that  the  word  'in-come'  does  not 
suggest  anything  coming  in  casually  once  for  all,  but 
some  continuous  receipt  which  can  be  conceived  as  a 
rate  per  annum,  although  no  doubt  often  a  fluctuat- 
ing rate."  3  "Gifts  from  the  living  are  excluded  from 
the  calculations  of  income  just  like  bequests  from  the 
dead."4  Professor  Cannan's  "income"  is  a  real 
stream  or  flow  with  no  hocus-pocus,  or  make-believe. 

Having  disposed  of  the  problem  of  incidental  re- 

1 "  Wealth,"  Edwin  Cannan,  London.     P.  S.  King  &  Son,  1914, 
P-  139- 

2  Ibid,  p.  143.  *  Ibid,  p.  145.  4  Ibid,  p.  146. 


XXIV  INTRODUCTION 

ceipts  from  such  sources  as  bequests,  gifts,  and  the 
like,  Professor  Cannan  takes  up  "the  undoubted 
sources  of  income,  the  possession  of  property  and  the 
performance  of  labor."  Here  again,  Professor  Cannan 
insists  that  "a  large  amount  of  money  received  is  by 
common  consent  excluded  from  the  category  of  in- 
come." *  "The  more  or  less  steady  flow  from  the 
possession  of  property  in  order  to  be  called  income 
must  ordinarily  be  of  the  nature  of  profit,  that  is  to 
say,  it  must  not  include  such  part  of  total  receipts  as 
are  necessary  in  order  to  pay  necessary  expenses,  in- 
cluding the  maintenance  of  property  unimpaired."  2 
A  manufacturer  naturally  deducts  from  his  gross 
receipts  a  sum  sufficient  for  the  upkeep  of  the  business. 
"Even  the  rent  of  lands  and  houses  is  not  all  income, 
inasmuch  as  the  contracts  between  landlord  and 
tenant  do  not  usually  bind  the  tenant  to  pay  every- 
thing necessary  for  maintaining  the  land  and  house 
in  an  unimpaired  condition."  3  "Maintenance  of  the 
property  unimpaired"  is  an  acknowledged  charge 
against  gross  income,  and  must  be  deducted  before 
the  amount  of  net  income  can  be  determined.4 

1 "  Wealth,"  Edwin  Cannan,  London.  P.  S.  King  &  Son,  1914, 
p.  147. 

2  Ibid,  p.  148. 

•Idem. 

*  It  is  interesting  to  note  that,  in  modern  business,  this  principle 
is  carried  so  far  that  an  industry,  like  a  steel  manufacturing  plant, 
writes  off  a  fund  for  the  amortization  of  its  mining  properties,  so  that 
at  the  end  of  20  years,  when  a  mine  that  cost  a  million  dollars  is 
exhausted,  a  fund  of  a  million  dollars  will  be  on  hand  to  acquire 
an  adequate  substitute.  The  Bethlehem  Steel  Company,  in  its 
annual  report  for  1913,  shows  an  item  of  $1,070,229.89  for  "Ex- 
tinguishments of  Mining  Investments,  Amortization  of  Patents,  etc.;" 
an  item  of  $4,677,847.48  for  "Depreciation  of  Other  Properties  and 


INTRODUCTION  XXV 

The  term  "purchasing  power"  patently  fails  to 
include  all  of  the  ways  in  which  people  secure  the 
goods  and  services  which  satisfy  their  wants.  How- 
ever, the  incomes  derived  through  purchasing  power 
obviously  include  the  great  proportion  and  the  meas- 
urable proportion  of  individual  or  family  incomes. 
Hence  it  is,  in  an  income  fact  study,  that  purchasing 
power  is  used  as  the  basis  for  income  computations. 

///.  Wages,  Standards,  and  Incomes 

The  present  study  is  an  outcome  of  necessity  rather 
than  of  choice,  because  it  is  the  product  of  a  line  of 
statistical  investigation,  which  has  led  inevitably  to 
an  inquiry  into  the  apportionment  of  income. 

A  study  of  wages x  showed  what  amounts  were 
being  paid  to  wage  earners.  The  wage  scale  is  the 
product  not  of  individual  choice  or  initiative,  but  of 
the  successive  bargains  made  over  a  long  period  of 
time  between  wage  earners  and  employers.  Hence  a 
statement  of  the  wage  scale  reveals  the  income  proba- 
bilities which  an  individual  faces  when  he  applies  for 
a  given  job. 

A  study  of  standards  2  of  living  based  on  the  idea 
that  there  is  an  ascertainable  minimum  of  decent 

Accruing  Renewals;"  and  an  item  of  $2,174,289.92  for  "Special 
Reserves  for  Extraordinary  Losses  and  Other  Direct  Charges  to 
Surplus."  The  net  earnings  from  January  i,  1905,  to  December  31, 
1913,  from  which  these  deductions  were  made,  amounted  to  $36,649,- 
696.51.  Ninth  Annual  Report  of  the  Bethlehem  Steel  Corporation, 
year  ending  December  31,  1913,  p.  9. 

1  "Wages  in  the  United  States,"  Scott  Nearing.    New  York,  Mac- 
millan  Co.,  1911. 

2  "Financing  the  Wage  Earner's  Family,"  Scott  Nearing.     New 
York,  B.  W.  Heubsch,  1913. 


XXVI  INTRODUCTION 

living  which  might  be  scientifically  measured,  showed 
that  the  wages  paid  under  the  existing  wage  scale 
were  insufficient,  in  a  very  considerable  proportion 
of  the  cases,  to  enable  the  adult  male  wage  earner  to 
maintain  such  a  standard  of  decency.  The  facts  on 
this  head  seemed  incontrovertible. 

Other  studies  have  showed  beyond  a  possibility 
of  question  that  a  considerable  proportion  of  the 
wage  earners'  families  are  living  below  a  standard  of 
decency.1  These  facts  make  it  apparent  that  sober, 
industrious  workmen  are  receiving  incomes  that  are 
inadequate  to  maintain  their  families  on  a  decent 
standard.  At  the  same  time,  the  cost  of  living  is 
increasing  faster  than  their  wages,  inadequate  though 
they  seem  to  be.2  Inevitably,  the  question  arises, 
"Do  these  low  standards  of  living  exist  among  the 
workers  because  they  do  not  get  a  fair  share  of  the 
products  of  industry,  or  because  there  is  not  a  suffi- 
cient amount  of  industrial  products  to  maintain  them 
on  a  decent  living  basis?  " 

The  present  study  is  devoted  to  a  very  practical 
question  of  fact.  The  world  wishes  to  know  how  the 
values  created  in  the  productive  process  are  actually 
divided  up  among  the  members  of  the  community. 
No  theory  of  distribution  can  solve  such  a  problem, 
and  it  would  seem  that  no  theory  of  distribution  will 
be  reduced  to  its  final  form  until  that  problem  is 
solved. 

The  issue,  for  the  purpose  of  the  present  discussion, 

*" Financing  the  Wage  Earner's  Family,"  Chapter  I;  also  "Mis- 
ery and  its  Causes,"  E.  T.  Devine.  New  York,  Macmillan  Co.,  1909. 

2  "Reducing  the  Cost  of  Living,"  Scott  Nearing.  Phila.,  G.  W. 
Jacobs  &  Co.,  1914. 


INTRODUCTION  XXVU 

can  be  stated  in  this  form:  As  the  result  of  produc- 
tion, in  a  certain  line — steel  rails,  shoes,  washing 
powder,  or  what  you  will — economic  values  equivalent 
to  $100  are  created.  What  happens  to  these  values 
after  the  processes  of  distribution  set  in?  A  part  of 
the  $100  of  value  goes  to  laborers  and  managers  in 
return  for  the  services  which  they  have  rendered  in 
production.  In  what  proportion  is  this  labor  return 
divided  among  those  who  have  rendered  service?  A 
part  of  the  $100  of  values  goes  to  the  owners  of  prop- 
erty. How  much  of  the  $100  is  thus  disposed  of? 

A  consideration  of  the  facts  of  distribution  makes 
these  the  real  matters  of  issue.  The  industrial  process 
is  creating  values.  Values  are  going  to  certain  groups 
and  to  certain  individuals.  What  individuals  are 
receiving  values  and  how  much  of  the  values  are  ac- 
tually falling  to  their  share? 

These  questions  will  not  be  finally  answered  for 
many  a  long  day.  Nevertheless,  the  facts  at  hand 
make  possible  a  tentative  answer  that  should  mark 
one  step  in  the  solution  of  the  perplexing  questions 
which  the  use  of  wealth  and  of  income  involve. 


INCOME 


INCOME 

CHAPTER  I 

THE   WHENCE   AND   THE   WHY   OF   INCOME1 

i 

/.  The  Relation  of  Income  to  Effort 

THE  term  "income"  as  used  in  this  study  will 
mean  the  flow  of  purchasing  power  which  comes  with 
reasonable  regularity  to  any  individual.  Despite  the 
drawbacks  to  such  a  definition,  noted  in  the  introduc- 
tion, it  seems  to  afford  the  most  workable  basis  for  a 
study  of  the  income  facts. 

There  are  two  questions,  both  of  them  fundamental 
to  any  discussion  of  income,  which  must  be  disposed 
of  before  the  income  facts  can  be  examined.  The 
first  of  these  questions  deals  with  the  sources  from 
which  income  is  derived;  the  second,  with  the  reasons 
for  the  payment  of  income.  Both  questions  assume  a 
prominent  place  in  any  income  discussion. 

The  transformation  which  followed  in  the  wake  of 
the  industrial  revolution  created  an  essentially  new 
line-up  of  income  sources.  Income  in  the  past  was 
usually  a  direct  return  for  effort.  Primitive  men  took 
their  food  and  clothing  directly  from  nature.  They 
shot  squirrels  in  the  woods  and  ate  them,  killed  deer 
and  made  their  skins  into  garments,  picked  berries 

1  Portions  of  this  chapter  have  appeared  in  the  American  Journal 
of  Sociology. 


2  INCOME 

and  fruit,  and  dug  roots.  During  the  time  when 
men  lived  a  true  hand-to-mouth  existence,  depending 
wholly  upon  the  natural  supply  of  food  and  shelter, 
there  was  an  immediate  relation  between  the  effort 
that  a  man  expended  and  the  income  that  he  secured 
in  return  for  that  effort. 

A  society  which  depended  primarily  upon  agricul- 
ture for  its  food  supply  experienced  a  like  relation 
between  effort  and  income.  So  long  as  there  was 
plenty  of  uncultivated  land,  the  man  of  energy  and 
thrift  could  secure  a  piece  of  it  for  himself,  and  by 
dint  of  hard  work  and  care,  he  could  obtain  a  living 
for  his  family  in  fairly  direct  proportion  to  the  amount 
of  work  which  he  was  willing  to  do.  When  all  of  the 
desirable  pieces  of  Mother  Earth  are  taken  into  in- 
dividual possession,  the  direct  relation  between  effort 
and  income  gives  place  to  an  indirect  relation  in  which 
land  ownership  becomes  a  source  of  income,  irrespec- 
tive of  any  effort  expended  upon  it.  Land  scarcity 
enables  the  man  who  owns  a  piece  of  it  to  exact  a 
rent  from  the  man  who  wishes  to  use  it.  Rent  can 
exist  only  where  the  amount  of  desirable  land  is 
limited.  If  land  were  as  abundant  as  air  and  sunshine, 
the  landlord  might  wait  to  eternity  before  his  land 
would  yield  him  a  penny. 

The  entrance  of  landlordism  does  two  things.  On 
the  one  hand,  it  enables  the  landlord  or  owner  of  land, 
to  secure  income  without  the  expenditure  of  effort.1 

1  The  landlord  may  have  expended  effort  to  secure  the  land.  That 
is  not  necessarily  true,  however,  since  he  may  have  obtained  it  by 
gift  or  inheritance.  His  power  to  demand  rent  for  land  does  not 
depend  upon  the  manner  of  obtaining  it  but  upon  the  possession 
alone. 


THE   WHENCE  AND  THE   WHY  OF  INCOME  3 

On  the  other  hand,  it  compels  the  tenant  to  forego 
that  part  of  the  product  of  his  effort  which  he  turns 
over  to  the  landlord  in  the  form  of  rent. 

Wherever  a  close  connection  exists  between  effort 
and  income,  a  strong  incentive  is  furnished  for  the 
expenditure  of  effort.  If  a  man  can  see  plainly  that 
his  work  will  bring  an  immediate  return,  and  a  return 
in  proportion  to  the  amount  of  work  which  he  does, 
he  will  be  stimulated  to  work  hard  for  long  hours  and 
to  employ  his  best  craftsmanship. 

//.  Money  as  Income 

Money  cannot  be  eaten,  or  worn,  or  enjoyed  in 
any  conceivable  way  except  by  the  miser  who  loves 
the  clink  of  corns;  yet  modern  income  is  universally 
measured  in  money  terms.  Before  a  man  can  secure 
his  meat,  vegetables,  or  clothing,  he  must  sell  some- 
thing which  he  possesses  (that  something  is  usually 
his  labor),  in  exchange  for  which  he  receives  a  money 
wage  that  may  in  turn  be  given  for  the  things  which 
he  desires. 

While  income  was  received  in  the  form  of  potatoes, 
apples,  and  fatted  calves,  it  was  very  easy  to  see  the 
sources  from  which  income  came.  There  were  few 
complexities  in  such  a  system  of  economics.  The 
man  labored;  he  received  a  return  in  proportion  to 
his  labor.  Whatever  the  character  of  his  income,  the 
source  from  which  it  was  derived  could  not  be  ques- 
tioned. 

The  complex,  highly  specialized  system  of  industry 
which  modern  society  has  evolved  makes  the  analysis 
of  the  sources  of  income  a  difficult  one.  It  is  in  the 


4  INCOME 

modern  industrial  regime  that  men  receive  money, 
and  not  goods,  in  return  for  their  labor.  Here  it  is 
that  they  are  compelled  to  exchange  their  money 
income  in  order  to  secure  their  real  income,  the  food, 
clothing,  and  shelter  which  they  require. 

Modern  industry,  in  comparison  with  primitive 
industry,  is  co-operative  to  an  extreme  degree.  The 
conditions  of  highly  evolved  industrial  co-operation 
under  which  each  man  makes  one  specialized  product, 
deny  to  the  individual  worker  an  opportunity  to 
create  the  things  which  he  needs  to  live.  The  butcher 
in  the  pork-packing  establishment  cannot  raise  vege- 
tables or  make  clothes.  The  lathe  hand  in  a  locomo- 
tive works  turns  out  nothing  at  all  that  can  be  of 
use  to  his  family.  Each  specialized  worker  per- 
forms his  allotted  task,  with  the  understanding  that 
such  products  of  other  specialized  workers  as  are 
needed  for  the  support  of  those  dependent  upon  him 
will  be  forthcoming  in  exchange  for  the  wages  which 
he  receives  from  day  to  day.  - 

///.  The  Sources  from  which  Income  is  derived 

Despite  the  complexities  which  the  intricacies  of 
modern  economic  relations  create,  it  is  possible  to 
analyze  the  sources  of  income  in  a  sufficiently  simple 
manner.  If  the  analysis  begins  at  the  goal  of  the 
economic  processes,  there  is,  first  of  all  the  consumer, 
who  wants  certain  things.  He  has  desires  which  can 
be  satisfied  only  through  the  possession  of  economic 
goods.  He  desires,  for  example,  to  place  a  ton  of 
coal  in  his  cellar  so  that  he  may  be  kept  warm  dur- 
ing the  ensuing  winter.  The  consumer  rather  than 


THE   WHENCE  AND   THE   WHY   OF   INCOME  5 

be  without  the  coal,  gives  the  coal  dealer  five  dollars. 
In  return  for  these  five  dollars,  the  coal  dealer  places 
a  ton  of  coal  in  the  consumer's  cellar.  The  economist 
therefore  says  that  the  coal  has  a  value  of  five  dollars, 
or  that  values  equal  to  five  dollars  have  been  created. 
What  happens  to  the  five  dollars  which  is  an  equiva- 
lent of  the  values  possessed  by  the  coal?  The  con- 
sumer, by  exchanging  five  dollars  for  a  ton  of  coal, 
has  played  a  part  in  setting  the  economic  machinery 
at  work.  In  some  way,  the  money  which  he  has  ex- 
changed for  the  coal  will  be  used  to  recompense  those 
who  were  responsible  for  placing  that  ton  of  coal  in 
the  consumer's  cellar. 

The  five  dollars,  when  apportioned  among  those 
who  are  responsible  for  the  production  of  the  coal, 
will  constitute  a  part  of  their  income.  Therefore,  by 
tracing  back  the  coal  to  its  source,  and  discovering  how 
it  came  into  being  as  a  commodity,  a  very  good  idea 
of  the  sources  of  income  may  be  obtained. 

There  is  a  demand  for  coal  because  there  is  a  de- 
mand for  heat  and  power.  Coal  furnishes  both, 
ministering  to  men's  wants  directly  through  the  pro- 
vision of  heat,  and  indirectly  through  the  develop- 
ment of  power.  Therefore  since  the  discovery  of  the 
availability  of  coal  for  these  two  purposes,  the  known 
existence  of  a  vein  of  commercially  available  coal 
gives  the  ground  in  which  the  vein  runs  a  value  com- 
mensurate with  the  value  of  the  coal  in  the  vein.  The 
land  in  which  the  coal  vein  runs  is  valuable  simply 
because  the  coal  is  there.  No  human  hand  need  have 
touched  the  land  or  the  coal,  further  than  to  ascertain 
its  presence,  nevertheless  value  attaches  to  the  land. 
Coal  is  a  natural  resource  which  men  have  learned  to 


6  INCOME 

use  for  the  satisfaction  of  their  wants.  Like  all  other 
natural  resources,  under  similar  circumstances,  it 
possesses  a  recognized  value. 

Clarity  of  discussion  will  be  secured  if  the  problem 
is  concretely  stated  in  the  terms  of  one  man's  experi- 
ence. A  farmer  in  central  Pennsylvania  is  engaged  in 
raising  general  farm  crops.  His  farm  is  an  indifferent 
one,  from  which  three  generations  of  rather  deter- 
mined Yankees  have  scratched  a  reasonably  good 
living.  The  land  is  worth  $20  an  acre — a  hypothetic 
value,  blanketed  indiscriminately  over  land  and  build- 
ings. 

When  the  present  holder  of  the  farm  took  the  place 
from  his  father,  he  fully  expected  to  "farm  it"  for  the 
rest  of  his  days.  Indeed,  he  had  no  other  idea,  since 
his  training  and  his  inclination  alike  led  him  to  follow 
in  his  father's  footsteps. 

Through  some  chance  the  farmer  finds  that  he  has, 
under  his  land,  two  thick  veins  of  high  grade  bitumin- 
ous coal.  The  veins  are  rich;  the  demand  for  coal  is 
brisk;  and  he  decides  to  open  a  mine. 

The  farmer  is  a  poor  man,  however.  He  discovers, 
on  investigation,  that  it  will  cost  several  thousand  dol- 
lars to  drive  a  shaft,  erect  machinery,  and  run  a  spur 
from  the  local  railroad  to  the  mine.  He  has  no  funds 
sufficient  for  such  an  undertaking;  but  a  neighboring 
farmer,  thrifty  and  prosperous,  offers  to  advance  the 
capital  required  for  the  opening  of  the  mine.  Here, 
then,  are  two  factors  in  the  mining  operation — the 
vein  of  coal  supplied  by  nature  and  funds  supplied 
by  a  neighbor  sufficient  to  put  the  coal  on  the  market. 

Neither  the  coal  land  owner  nor  the  farmer  with  the 
capital  have  any  intention  of  mining  the  coal  them- 


THE   WHENCE   AND   THE   WHY   OF   INCOME  7 

selves.  In  the  first  place,  they  know  nothing  about 
mining,  and  in  the  second  place,  they  do  not  like  the 
idea  of  spending  a  large  part  of  their  waking  hours 
underground.  Besides,  the  process  of  running  a  coal 
mine  is  one  that  takes  more  than  two  men.  Help 
must  evidently  be  secured  from  a  number  of  men 
in  the  neighborhood  who  can  be  persuaded  to  join  in 
the  enterprise  and  to  do  the  actual  work  of  mining. 
These  men  have  no  land  or  capital  of  their  own.  They 
have  families  to  support,  however,  and  they  are  per- 
fectly willing  to  give  their  time  and  energy  to  the 
task  of  digging  the  coal.  They  will  drive  the  shaft, 
put  the  machinery  into  place,  and  work  in  the  mine, 
provided  they  are  paid  for  their  services. 

One  difficulty  still  remains.  The  farmer  who  owns 
the  coal  land,  the  farmer  who  advances  the  funds, 
and  the  neighbors  who  offer  to  work  in  the  mine  are 
ignorant  of  mining.  The  farmer  who  is  opening  the 
mine  therefore  applies  to  the  president  of  a  school  of 
mines,  who  refers  him  to  a  man  trained  in  the  tech- 
nique of  mine  construction.  This  man  likewise  agrees 
to  come  for  a  consideration  and  superintend  the  enter- 
prise. The  farmer  opens  his  land  for  the  operation; 
the  capitalist  advances  the  funds;  the  superintendent 
directs  the  laborers;  the  laborers  drive  the  shaft,  lay 
the  track,  timber  the  mine  and  dig  out  the  coal.  In 
the  course  of  a  few  months  the  mine  is  in  full  operation. 
During  that  time,  both  superintendent  and  laborers 
have  been  paid  for  their  services.  The  owner  of  the 
farm  and  the  owner  of  the  funds  have  as  yet  received 
nothing. 

The  time  has  come,  however,  when  the  mine  begins 
to  realize  on  the  investment.  Each  day  a  dozen  cars 


8  INCOME 

of  coal  are  hauled  away  from  the  mine's  mouth,  taken 
to  a  neighboring  city  and  dumped  in  the  yards  of  a 
coal  dealer.  This  coal  is  then  taken  from  the  yards 
to  the  people  who  have  bought  it.  Some  of  them  are 
householders  who  wish  the  coal  because  it  supplies 
heat;  some  are  the  owners  of  office  buildings  who  wish 
the  coal  because  it  supplies  heat  and  light;  and  some 
are  the  owners  of  factories,  who  convert  the  coal  into 
the  power  which  drives  their  machinery,  and  enables 
them  to  produce  paper,  pens,  breakfast  food,  radia- 
tors, and  other  commercial  articles. 

The  coal  has  found  a  market.  Among  other  tons, 
the  one  with  which  this  discussion  began  is  sold,  and 
the  returns  are  distributed.  The  coal  dealer,  his 
teamsters,  and  helpers;  the  railroad,  with  its  employes; 
the  banking  institutions,  with  all  of  their  ramifica- 
tions; and  the  mining  operation  itself  secure  a  part 
of  the  five  dollars  which  was  paid  out  for  the  ton  of 
coal. 

In  order  that  the  illustration  may  still  be  concrete 
and  apt,  it  is  necessary  to  inquire,  in  detail,  what  has 
actually  happened  at  the  mine.  Labor  has  taken  the 
coal  out  of  the  vein,  and  with  the  aid  of  machinery, 
and  under  the  direction  of  the  superintendent,  it  has 
placed  the  coal  on  the  cars  ready  for  shipment.  In 
the  vein  the  coal  could  satisfy  no  human  want :  in  the 
coal-bin  of  the  city  consumer  it  serves  as  a  guarantee 
against  the  severity  of  winter.  The  processes  involved 
in  the  getting  of  the  coal  out  of  the  ground  and  plac- 
ing it  on  the  railroad  cars  for  shipment  have  therefore 
added  to  the  value  of  the  coal.  Granted  that  value 
has  been  added  to  the  coal,  the  question  naturally 
arises,  "who  is  reponsible  for  the  addition?"  The 


THE   WHENCE   AND    THE   WHY   OF   INCOME  Q 

owner  of  the  farm  did  nothing  except  to  grant  per- 
mission for  the  use  of  his  land.  The  fact  that  he 
owned  the  land,  however,  would  give  him  a  perfect 
right  under  his  title  deeds  to  refuse  to  allow  any  one 
to  mine  the  coal.  The  man  who  advanced  the  capital 
ran  a  certain  risk.  The  vein  might  have  proved  poor; 
or  the  market  might  have  declined  to  a  point  where  it 
would  be  unprofitable  to  mine  the  coal.  Had  either 
of  these  exigencies  arisen,  the  investor  of  the  capital 
would  have  lost  a  part  or  all  of  his  investment.  In 
the  actual  production  of  the  coal,  however,  he  played 
no  more  active  part  than  that  played  by  the  landlord. 
He  merely  signed  his  name  to  a  paper  instructing  the 
bank  to  transfer  credit  from  his  account  to  that  of 
the  coal  land  owner.  The  superintendent  and  the 
laborers  are  in  a  very  different  case.  They  have  both 
devoted  energy  and  time  to  the  work  of  opening  the 
mine,  and  their  presence  is  still  required  for  the  opera- 
tion of  the  mine.  The  landlord's  title  deeds  provided 
a  place  for  the  operation  of  the  industry;  the  capi- 
talist's funds  provided  for  the  purchase  of  machinery 
and  the  hiring  of  labor;  the  time  and  energy  of  the 
superintendent  and  laborers  got  the  coal  out  of  the 
vein  and  placed  it  in  the  cars. 

Each  of  the  parties  connected  with  this  productive 
process  demands  a  return.  The  landlord  for  the  use 
of  his  land  asks  rent.  Although  he  is  no  way  respon- 
sible for  the  presence  of  the  coal  on  his  land;  although 
he  was  using  the  land  as  a  farm  when  coal  was  discov- 
ered on  it,  and  although  the  land  is  still,  for  the  most 
part,  usable  for  farm  purposes,  the  farmer  asks  a 
rent,  or  royalty,  in  proportion  to  the  amount  of  coal 
secured  from  the  land.  The  capitalist  expects  interest 


IO  INCOME 

for  the  funds  which  he  advanced.  These  funds  may 
have  been  the  product  of  thrift  and  careful  living; 
they  may  have  been  inherited;  or  they  may  have  been 
borrowed  for  the  occasion  from  some  financial  insti- 
tution. Irrespective  of  the  source  of  the  funds,  the 
capitalist  demands  and  receives  interest  on  his  invest- 
ment. The  superintendent  and  the  laborers  for  their 
services  demand  salaries  and  wages.  They  have 
invested  in  the  enterprise  the  nerve,  energy,  and 
muscular  tissue  necessary  to  carry  it  to  completion. 
Their  return  is  a  return  for  days  of  effort. 

This  illustration,  though  simple,  typifies  the  means 
by  which  income  is  secured  and  paid  in  modern  indus- 
trial society.  As  a  matter  of  practice,  the  land  owner 
usually  buys  the  natural  resource  with  a  knowledge 
of  its  economic  value.  He  secures  his  capital  from  a 
financial  institution — a  bank,  trust  company,  or  in- 
surance company — which  lends  out  money  deposited 
with  it  by  numerous  small  investors.  Operations  are 
begun  by  well-established  concerns  which  have  per- 
fected the  mechanism  of  production.  Nevertheless, 
the  principle  of  the  coal  illustration  remains  intact. 

IV.  The  Productive  Processes  and  Economic  Wealth 

All  production  is  carried  forward  upon  the  resources 
of  nature,  by  labor,  with  the  aid  of  capital. 

Every  product  of  industry  owes  its  origin  to  natural 
resources.  The  fields,  the  mountains,  the  water — 
some  natural  agent,  was  the  starting  point  for  each 
material  good,  on  its  way  through  the  intricacies 
of  the  industrial  system.  Food,  clothing,  wealth 
in  all  its  forms  is  derived  originally  from  nature. 


THE    WHENCE   AND   THE   WHY   OF   INCOME  II 

These  natural  resources  are  converted  by  labor  with 
the  aid  of  tools  and  machines  into  forms  that  satisfy 
the  wants  of  the  community.  A  brick  is  no  farther 
economically  from  the  clay  bank,  a  chair  is  no  farther 
economically  from  the  forest,  a  steel  rail  is  no  farther 
economically  from  the  ore  bed  than  a  ton  of  coal  is 
from  the  vein  in  which  it  originally  lay.  The  forces 
of  nature  working  through  the  ages  have  created 
things  which  mankind  needs.  Human  effort  expended 
on  these  products  of  nature  converts  them  into  forms 
that  are  usable.  The  processes  involved  in  this  con- 
version are  the  processes  of  production.  Out  of  those 
processes  of  the  production  of  wealth,  value  arises. 

There  are  many  popular  fallacies  which  must  be 
overcome  before  men  fully  understand  this  relation. 
There  is  still  a  suspicion  lurking  in  the  minds  of  the 
community  that  money  breeds  money;  that  wealth 
can  be  created  by  some  alchemy  through  the  putting 
of  pen  to  paper.  People  feel,  in  a  hazy,  indistinct 
manner,  that  there  are  ways,  and  known  ways,  in 
which  values  can  be  generated  as  acetylene  gas  is 
generated,  by  the  combustion  of  some  potent  element. 

All  of  the  usable  wealth  in  the  world  has  been 
created  in  the  same  way  that  the  values  in  the  ton  of 
coal  were  created.  All  usable  wealth,  no  matter  what 
its  form,  owes  its  value  in  the  beginning  to  nature's 
gifts,  and  after  that  to  the  processes  of  production. 

V.  The  Monopoly  Power  of  Ownership 

The  value  of  coal  properties  and  of  coal  lies  in  this 
fact, — that  the  owner  of  the  coal  properties  demands 
and  receives  a  rent  for  ownership  alone.  That  is,  he 


12  INCOME 

can  say  to  all  mankind — "Pay  me  what  I  demand  or 
let  the  coal  stay  in  the  ground."  If  he  fixes  his  de- 
mand at  a  point  where  the  coal  can  be  used  profitably, 
he  receives  the  rent  demanded,  the  coal  is  marketed, 
and  the  rent,  be  it  large  or  small,  becomes  a  fixed 
charge  on  the  production  of  the  coal.  This  rent 
charge  exists  because  the  monopoly  power  which  the 
title  to  coal  lands  gives  the  land  owner  enables  him 
to  fix  a  price  and  to  receive  a  return  for  his  owner- 
ship. 

The  monopoly  power  which  land  ownership  gives 
is  apparent.  The  acre  of  wheat  land  in  Dakota  is 
valuable.  Why?  Because  the  number  of  acres  of 
equally  fertile  land  is  less  than  enough  to  go  around. 
Timber  land  is  increasing  in  value  with  great  rapidity. 
Why?  Because  the  timber  supply  of  the  United 
States  is  being  used  up  faster  than  it  is  growing. 
Warm  breezes,  rain,  and  sunshine  are  free  to  all  with- 
out the  payment  of  any  return.  Why?  Because 
there  is  a  sufficient  supply  of  them  to  go  around. 
Spring  rain  and  sunshine  participate  in  the  produc- 
tion of  wheat  equally  with  soil  fertility.  The  fertile 
soil  possesses  rent  value  because  it  is  so  limited  in 
amount  that  there  is  not  enough  for  all.  Air  and 
sunshine  possess  no  rent  value  because  they  are  so 
limitless  in  amount  that  after  each  one  has  secured  his 
share  an  abundant  surplus  remains. 

Should  productivity  or  monopoly  power  be  regarded 
as  the  chief  reason  for  the  payment  of  a  return  to  land 
for  its  participation  in  production?  If  productivity 
is  the  answer,  then  unless  the  actual  producing  power 
of  the  land  increases  in  bushels  per  acre,  or  tons  per 
square  mile,  it  should  receive  no  increased  return.  If, 


THE   WHENCE   AND   THE   WHY    OF   INCOME  13 

on  the  other  hand,  monopoly  power  is  the  source  ot 
the  values  which  the  land  owner  receives  from  the 
productive  process,  then  an  increase  in  population 
and  an  increase  in  the  wants  of  people,  irrespective 
of  the  productivity  of  the  land,  should  increase  the 
share  which  the  landlord  receives  out  of  the  products 
of  industry.  This  latter  hypothesis  fits  the  facts  ex- 
actly. The  more  people  there  are  on  a  given  area,  the 
higher  the  civilization,  and  the  more  wants  the  people 
have,  the  higher  will  be  the  value  of  natural  resources, 
and  the  greater  will  be  the  share  which  the  owner  of 
them  receives,  provided  always  that  they  are  limited 
in  extent  and  may  be  monopolized  under  the  laws 
of  private  property.  Rivers  and  harbors  receive  no 
share  in  distribution.  Air  and  sunlight  receive  no 
share  in  distribution.  Neither  is  subject  to  private 
property.  Coal  lands,  timber  lands,  city  land,  agri- 
cultural land, — all  of  these  forms  of  resources,  which 
are  the  subject  of  private-property  law,  show  increased 
values,  and  pay  increased  rent  charges  with  the  de- 
velopment of  society  and  the  increase  of  population. 

The  matter  may  be  looked  at  from  a  somewhat 
different  angle.  Here  is  a  ton  of  iron  ore,  and  there 
a  gram  of  radium.  The  iron  ore  is  worth  a  few  dollars; 
the  radium  is  worth  thousands.  What  is  the  cause  of 
the  difference  in  value?  Nothing  more  than  the 
scarcity  of  one  as  compared  with  the  scarcity  of  the 
other.  The  gram  of  radium  has  not  assisted  in  pro- 
duction any  more  than  the  ton  of  iron  ore  has  assisted 
in  production.  Iron  ore  is  more  plentiful  than  radium, 
however;  therefore  the  owner  of  the  radium,  because 
he  possesses  a  thing  which  is  very  scarce  and  in  great 
demand,  may  exact  a  high  monopoly  price  for  his 


14  INCOME 

product.  Natural  resources  share  in  the  values  created 
in  productive  processes  only  when  they  are  subject 
to  the  monopoly  of  private  property  ownership,  and 
only  in  proportion  to  the  power  of  that  monopoly. 

VI.  The  Monopoly  Principle  Applied  to  Capital 

Capital,  like  land,  is  necessary  to  production.  In 
the  form  of  tools,  it  participates  in  the  productive 
processes.  In  the  form  of  money  and  credit,  it  like- 
wise participates  in  the  activities  of  industry. 

The  capitalist,  by  transferring  credit  at  the  bank, 
provided  for  the  erection  of  the  coal  breaker.  He 
did  not  erect  the  breaker  himself;  he  merely  gave 
into  the  hands  of  another  a  sufficient  amount  of  pur- 
chasing power  to  enable  him  to  hire  the  labor  and  buy 
the  materials  out  of  which  the  breaker  was  to  be 
made.  Nevertheless,  the  capitalist  expected  to  re- 
ceive, in  return  for  the  use  of  his  credit  a  share  in  the 
products  of  industry. 

The  coal  breaker  standing  alone  could  never  produce 
anything.  The  production  of  coal  presupposes  the 
activity  of  labor.  In  one  sense,  therefore,  the  breaker 
is  not  productive.  On  the  other  hand,  the  presence 
of  the  breaker  greatly  facilitates  the  mining  and  mar- 
keting of  the  coal;  that  is,  the  breaker  is  an  aid  in  pro- 
duction. The  capitalist  did  not  erect  the  breaker, 
however.  He  merely  owned  the  power  to  erect  a 
breaker,  and  by  giving  directions  that  bank  credit  be 
transferred  and  a  breaker  be  erected,  he  secured  that 
result.  On  what  grounds  does  the  capitalist  take  a 
share  of  the  values  created  in  the  coal?  Merely  be- 
cause the  amount  of  capital  in  the  community  is 


THE   WHENCE  AND   THE   WHY   OF  INCOME          15 

limited,  and  because  the  ownership  of  capital  gives 
the  owner  the  right  to  exact  a  return  for  his  ownership. 
The  capitalist,  like  the  landlord,  receives  a  share 
in  the  products  of  industry.  He  receives  a  share  be- 
cause he  owns  capital.  His  share,  moreover,  is  in 
direct  proportion  to  the  scarcity  of  capital  in  the  rela- 
tion to  the  demand  for  it.  The  monopoly  power  of 
ownership,  and  not  productivity,  determines  that  the 
capitalist  shall  receive  a  share  of  the  values  created  in 
industry. 

VII.  Labor  Monopoly  as  a  Determiner  of  Wages 

Labor  is  necessary  to  production.  Labor  supplies 
the  motive  force  which  animates  industrial  activity. 
Labor  is  the  energizing  and  directing  influence  in  the 
productive  processes.  Used  as  a  term  covering  all 
forms  of  productive  effort,  labor  is  the  life  force  of 
the  productive  system.  The  landlord  and  the  capi- 
talist shared  in  the  products  of  industry  because  of 
their  ownership  of  land  and  capital;  labor  shares  in 
the  products  of  industry  because  it  is  expending  energy 
on  the  industrial  processes.  Thus  rent  and  interest 
appear  to  be  a  return  for  the  ownership  of  wealth, 
while  salaries  and  wages  are  a  return  for  the  expendi- 
ture of  energy. 

The  amount  received  by  labor  for  its  share  in  pro- 
duction, like  the  amount  of  rent  and  of  interest,  is 
determined  by  the  extent  of  its  monopoly  power,  or 
by  its  scarcity.  The  unskilled  laborer  in  a  section 
of  the  country  where  labor  is  very  scarce  receives  a 
given  wage.  In  another  section  of  the  country,  where 
immigrants  compete  fiercely  with  one  another  for  an 


1 6  INCOME 

opportunity  to  work,  a  laborer  expending  exactly  the 
same  amount  of  energy  and  producing  the  same  com- 
modities, will  receive  perhaps  a  half  or  two-thirds  of 
the  wage  paid  to  his  fellow  in  the  district  suffering  from 
labor  scarcity.  On  the  other  hand,  an  unskilled  laborer 
bargaining  individually  with  a  great  corporation  or  a 
large  employer,  is  at  such  a  woeful  disadvantage  that 
he  can  receive  a  wage  little,  if  any,  above  the  bare 
cost  of  subsistence.  Organized  into  a  powerful  union, 
this  same  laborer  can  add  perhaps  fifty  per  cent  to 
his  wages.  The  experience  of  the  building  trades  in 
various  cities  where  there  are  unions  and  where  there 
are  not  unions,  amply  demonstrates  the  difference 
between  the  two  groups  of  men.  The  man  who  can 
draw  brilliantly,  and  in  a  style  which  is  readily  de- 
manded by  the  public,  secures  an  extremely  high 
wage  for  writing  advertisements.  If  there  were  ten 
men  of  equal  ability  clamoring  for  this  position,  it 
would  pay  a  bare  pittance.  Witness  the  high  returns 
to  advertisement  writers,  and  the  low  returns  to 
poets,  both  groups  of  men  having  equal  skill  in  their 
crafts.  The  wages  of  labor  are  returns  in  proportion 
to  monopoly  in  exactly  the  same  sense  that  the  inter- 
est on  capital  and  the  rent  on  land  are  returns  to  mo- 
nopoly power. 

Heretofore,  economics  has  distinguished  between 
landlords,  capitalists,  and  laborers,  for  the  very  absurd 
reason  that  at  some  time  in  the  past  under  an  agricul- 
tural civilization,  such  a  classification  was  supposed 
to  have  been  accurate.  Such  a  distinction  was  never 
particularly  valid.  Its  greatest  justification  lay  in 
its  traditional  origin.  It  was,  moreover,  an  objective 
distinction.  The  same  man  might  be  a  capitalist  and 


THE   WHENCE   AND   THE   WHY   OF   INCOME          17 

a  landlord.  Indeed,  according  to  the  writings  of  the 
later  economists,  he  might  be  a  capitalist,  landlord, 
and  laborer,  too,  paying  himself  rent  and  interest  hi 
addition  to  wages. 

The  time  has  come  when  a  new  classification  of  the 
reasons  for  paying  income  must  be  formulated.  This 
classification  will  be  based  on  function  rather  than  on 
tradition.  It  will  be  made  personal  and  concrete, 
rather  than  impersonal  and  abstract. 

The  new  classification,  instead  of  contrasting  the 
returns  paid  to  the  various  forms  of  wealth  and  to 
those  who  expend  energy  in  production,  will  make  an 
alignment  between  the  returns  paid  to  the  owner  of 
wealth,  on  the  one  hand,  and  the  returns  paid  to  those 
who  expend  energy,  on  the  other.  That  classification 
exists  in  fact  in  the  contrast  between  property  income 
(the  income  from  property  ownership)  and  service 
income  (the  income  from  human  effort) . 

The  distinction  between  property  income  and  ser- 
vice income  measures  the  relation  of  the  income-earner 
as  an  individual  to  the  productive  process.  The 
capitalist  and  the  landlord  receive  returns  for  the 
ownership  of  property;  they  therefore  receive  property 
income.  The  laborer  receives  returns  for  the  expendi- 
ture of  energy;  he  therefore  receives  service  income. 
The  distinction  is  not  absolute.  The  amount  paid  to 
the  laborer  will  vary  with  his  monopoly  power,  just 
as  the  amount  paid  to  the  landlord  and  the  capitalist 
vary  with  their  monopoly  power.  The  classification 
is,  however,  more  accurate  than  the  old  one,  in  the 
sense  that  it  applies  more  nearly  to  American  condi- 
tions, and  it  is  more  absolute  in  the  sense  that  it  recog- 
nizes the  forms  in  which  income  is  now  paid. 


CHAPTER  II 

SERVICE  INCOME  AND  PROPERTY  INCOME  l 

I.  Income  and  Special  Privilege 

VALUES  are  created  in  the  industrial  process  and  dis- 
tributed in  the  form  of  income  to  the  various  members 
of  the  community.  Such  an  axiomatic  statement  is 
ordinarily  accepted  without  question.  There  is  far 
less  unanimity  of  opinion,  however,  regarding  the 
categories  in  which  those  who  receive  income  be- 
long. 

The  old  classification  of  income  or  distributive 
shares  into  rent,  interest,  wages,  and  profits,  has  lost 
its  force  with  the  disappearance  of  a  distinct  landlord 
class,  and  the  substitution  of  highly  paid  salaried 
officers  for  the  entrepreneur.  The  changes  in  the 
methods  of  industry  necessitate  a  change  in  the  state- 
ment of  what  happens  to  industrial  values  after  they 
reach  the  distributive  stages.  The  discussion  of 
economic  questions  bearing  upon  the  distribution  of 
income  would  be  greatly  facilitated  if  a  classification 
could  be  established  of  the  recipients  of  income  that 
would  conform  in  some  measure  to  the  facts  of  distri- 
bution. The  distinction  between  income  as  a  return 
for  services,  and  income  as  a  return  for  property 
ownership,  seems  to  offer  such  a  classification. 

1  Most  of  the  material  in  this  chapter  appeared  in  the  Popular 
Science  Monthly. 

18 


SERVICE   INCOME  AND   PROPERTY   INCOME          19 

This  distinction  has  the  advantage  of  an  historic 
as  well  as  of  a  current  justification.  A  definite  rela- 
tion exists  in  all  primitive  societies  between  the  ex- 
penditure of  energy  and  the  income  derived  as  a  result 
of  such  energy  expenditure.  The  clever  hunter  came 
home  with  game.  The  dexterous  woman  had  mats 
and  leather  shirts  to  show  for  her  toil.  Even  the 
spoils  of  war  were  hard-earned.  They  represented 
privation  and  exertion  of  the  most  extreme  kind. 
Among  primitive  men  income  was,  for  the  most  part, 
earned  by  effort.  Men  and  women  expended  time 
and  energy,  in  return  for  which  they  enjoyed  the 
fruits  of  their  toil. 

The  development  of  civilization  has  uniformly  led 
away  from  this  direct,  primitive  relation  between 
effort  and  income.  Systems  of  various  kinds  have 
been  devised  whereby  one  man  might  live  upon  the 
proceeds  of  another  man's  effort,  so  that  the  clever 
and  far-seeing  members  of  the  group  gradually  en- 
trenched themselves  in  a  strategic  position  from 
which  they  could  exert  a  power  that  would  make  them 
parasitic  on  the  others.  Social  organization  led  to 
economic  parasitism. 

Economic  parasitism,  in  its  most  extreme  form, 
is  based  on  chattel  slavery;  more  highly  developed, 
it  is  built  upon  land  ownership;  in  its  still  higher  forms, 
it  fastens  itself  upon  the  social  body  with  the  strong 
bonds  of  capitalism.  Whatever  its  form,  its  principle 
is  the  same. 

The  pages  of  history  may  be  searched  in  vain  for 
the  records  of  a  civilization  which  did  not  evolve  some 
device  whereby  the  strong  or  the  astute  could  live  at 
the  expense  of  the  weak  and  the  less  able.  The  para- 


2O  INCOME 

sitic  class  has  always  bulwarked  its  position  by  the 
ownership  of  something.  The  land,  which  was  ori- 
ginally common  property,  was  gradually  absorbed  by 
a  small  landholding  aristocracy  or  oligarchy,  which 
was  enabled  by  the  possession  of  property  titles,  fran- 
chises, and  special  privileges  to  enjoy  the  fruits  of 
other  men's  labor.  As  social  organization  has  grown 
more  complex  the  opportunities  for  parasitism  have 
become  greater.  In  primitive  society,  the  power  of 
the  parasites  was  ephemeral.  They  held  their  preroga- 
tives by  might.  For  them,  eternal  vigilance  was  the 
price  of  living  at  the  expense  of  the  workers.  As 
civilization  advanced,  the  spiritual  as  well  as  the  phy- 
sical forces  of  the  world  were  called  upon  to  place 
additional  controlling  power  in  the  hands  of  the  ruler. 
The  Church  held  out  the  threat  of  hell.  The  State, 
with  gallows,  jails,  and  stocks  drove  the  unfortunate 
subjects  into  line.  The  name  "tax  gatherer"  grew 
to  be  a  name  of  reproach,  because  tax  gathering  was 
the  outward  manifestation  of  organized,  legalized, 
sanctified,  and  time-honored  exploitation;  it  was  the 
process  whereby  the  few  who  did  not  work  lived  at 
the  expense  of  the  many  who  did  work. 

Let  no  one  argue  that  because  historic  civilizations 
have,  without  exception,  developed  economic  para- 
sitism, therefore  economic  parasitism  is  a  necessary 
accompaniment  of  the  development  of  civilization. 
No  such  black  prophecy  is  reflected  from  the  pages  of 
the  past.  History  contains,  at  most,  a  warning,  which 
they  who  would  learn  do  well  to  read. 

The  civilization  of  the  West  has  marked  its  goal 
plainly.  It  aims  at  universal  opportunity.  There  is 
no  thought  of  equality,  but  there  is  a  very  strong  sen- 


SERVICE  INCOME  AND  PROPERTY  INCOME     21 

timent  in  favor  of  equal  chances  for  men  and  for 
women  of  all  social  classes. 

The  civilization  of  the  West  has  been  erected  upon 
the  theory  of  the  validity  of  effort.  In  its  very  incep- 
tion opposed  to  parasitism,1  the  Western  World  has 
organized  a  sturdy  dynamic  civilization  built  upon  the 
individual  and  co-operative  activities  of  its  individual 
members.  Without  effort,  no  civilization.  Without 
effort,  no  progress.  Effort  is  the  life  force  of  social 
advance. 

Reward  provides  the  stimulus  to  effort.  It  is  re- 
ward, or  the  hope  of  reward,  that  inspires.  A  man 
may,  like  the  philosopher,  labor  to  express  an  idea. 
He  may  toil  to  produce  kitchen  vegetables.  He  may 
aim  at  the  creation  of  beauty.  He  may  desire  a  seat 
in  Congress.  However  ethereal  or  mundane  the  goal, 
effort  is  still  put  forth  to  achieve  it.  Deny  the  reward 
of  effort,  and  the  well-spring  of  effort  is  dried  up. 

The  general  principle  of  the  relation  of  reward  and 
effort  applies  with  seven  times  greater  force  to  the 
economic  world.  Men  have  wants.  They  produce 
economic  goods,  or  they  labor  for  income  in  order  to 
satisfy  their  wants.  The  physical  wants  must  be 
satisfied  or  the  man  dies.  Therefore,  whether  he 
will  or  no,  he  is  compelled  to  expend  such  effort  as 
will  provide  for  them. 

Men  labor  to  earn  income  which  will  supply  their 

1  It  will  be  urged  that  the  civilization  of  the  West  has  been  built 
upon  serfdom  and  slavery.  Historically,  that  is  true;  but  meanwhile 
the  ideal  has  been  freedom.  It  is  true  that  serfdom  and  slavery 
were  at  one  time  a  part  of  Western  civilization;  it  is  equally  true  that 
both  have  been  broken  up  and  stamped  out  of  existence.  The  West- 
ern World  has  turned  its  face  definitely  away  from  both. 


22  INCOME 

physical  wants.  Imagine  their  state  of  mind  when 
they  discover  that  they  are  not  receiving  the  wealth 
that  they  create!  Imagine  the  dissatisfaction  and 
unrest  when  they  further  find  that  the  title  to  a  part 
of  the  wealth  which  they  have  created  has  passed  to 
men  and  women  who  took  no  share  in  the  wealth 
creation !  If  there  is  such  a  thing  as  ethical  economics, 
one  of  its  cornerstones  is  the  proposition  that  a  man 
should  get  what  he  earns — all  that  he  earns.  The 
denial  to  any  man  of  his  earnings  is  an  affront  to  one 
of  those  primitive  concepts  of  justice  which  lead  to 
the  overthrow  of  the  institutions  which  produce  the 
injustice. 

What  do  men  receive  in  return  for  their  services? 
What  do  men  who  expend  no  effort  receive  in  return 
for  their  property  holdings?  What  share  in  the  values 
produced  by  industry  take  the  form  of  service  income; 
what  shares  take  the  form  of  property  income?  The 
answer  goes  far  toward  a  solution  of  some  of  the  most 
pressing  economic  problems. 

II.  Service  vs.  Property  Ownership 

Heretofore,  political  economy  has  been  content  to 
discuss  income  under  the  heading  of  rent,  interest, 
profits,  and  wages.  The  situation  in  the  United 
States  cannot  be  analyzed  as  it  was  by  the  English 
economists,  since  there  is  no  American  landlord  class, 
and  therefore  no  capitalist  class  distinct  from  the 
landlord  class.  Agricultural  land,  for  the  most  part, 
is  owned  by  individual  farmers,  or  by  persons  of  mod- 
erate means.  The  natural  resources  and  the  industries 
of  the  country  are  owned  and  capitalized  through  the 


SERVICE   INCOME  AND   PROPERTY   INCOME          23 

corporate  system  of  business  organization.  In  Eng- 
land there  is  still  a  landlord  who  owns  the  coal  lands, 
and  a  capitalist  who  develops  them;  in  the  United 
States  the  natural  resources  are,  for  the  most  part, 
owned  and  developed  by  the  same  industrial  group. 

A  classification  loses  virility  whenever  it  becomes  a 
mere  abstraction.  That  classification  only  possesses 
real  vitality  which  has  some  specific  bearing  on  the 
conditions  that  it  aims  to  describe.  An  appeal  to 
the  present  income  facts  in  the  United  States  will 
alone  provide  a  classification  of  income  which  will  be 
really  applicable  to  the  conditions  now  prevailing. 

It  is  not  true  that  there  are  in  America  two  distinct 
property-owning  classes — the  capitalists  and  the  land- 
lords. Any  argument  based  on  such  a  premise  is 
bound  to  fail  because  of  the  absence  of  supporting 
fact.  It  is  true,  however,  that  there  are  two  kinds  of 
income — income  from  service  and  income  from  prop- 
erty ownership.  Between  these  two  sources  of  income 
the  distinction  can  be  drawn  with  considerable  nicety. 

The  student  of  industrial  and  economic  facts  will 
search  in  vain  through  the  twentieth  century  reports 
of  corporations  for  any  mention  of  "rent"  and  "in- 
terest" as  distinct  items.  There  are  two  income  terms 
which  the  business  world  recognizes — "interest"  and 
"dividends."  The  first  is  paid  to  the  owners  of  bonds; 
the  second,  to  the  owners  of  stocks.  If  a  man  leases 
a  farm  he  pays  "rent"  on  both  land  and  improve- 
ments. If  he  takes  a  house  or  an  office  he  does  like- 
wise. The  practice  of  accounting  draws  this  distinc- 
tion between  the  various  forms  of  income — there  is  a 
return  to  property  owners,  called  interest  or  dividend; 
there  is  a  return  to  workers  called  wages  or  salaries. 


24  INCOME 

Income  from  property  ownership  and  income  from 
industrial  effort  are  clearly  differentiated.  In  the 
more  highly  organized  industries,  like  the  railroads, 
accounting  keeps  the  two  funds  absolutely  distinct. 

The  returns  for  different  kinds  of  service  will,  like 
the  returns  for  different  kinds  of  property,  grow  less 
distinct  as  industrial  organization  advances.  The 
lines  between  professions  and  trades,  between  various 
trades,  and  between  occupations  in  the  trades,  grow 
less  and  less  marked.  Infinite  specialization  renders 
any  adequate  distinctions  difficult  or  impossible.  So 
too,  the  landlord  and  capitalist  merge  in  the  stock- 
holder, the  bondholder  and  the  investor.  Meanwhile, 
the  distinction  between  income  from  services  and 
income  from  property  will  grow  clearer  and  more 
emphatic. 

Theories  aside,  an  appeal  to  the  world  of  affairs 
shows  that  the  current  industrial  facts  in  the  United 
States  makes  the  logical  income  distinction  one  be- 
tween that  income  which  is  the  product  of  effort,  and 
that  income  which  is  the  product  of  property  owner- 
ship. 

The  individual  whose  effort  creates  values  for  which 
society  pays  receives  service  income.  His  reward  is  a 
reward  for  his  personality,  his  time,  his  strength. 
Railroad  president  and  road-mender  devote  them- 
selves to  activities  which  satisfy  the  wants  of  their 
fellows.  Their  service  is  direct.  In  return  for  their 
hours  of  time  and  their  calories  of  energy,  they  receive 
a  share  of  the  product  which  they  have  helped  to 
produce. 

The  individual  who  receives  a  return  because  of  his 
property  ownership,  receives  a  property  income.  This 


SERVICE   INCOME  AND   PROPERTY   INCOME          25 

man  has  a  title  deed  to  a  piece  of  unimproved  land 
lying  in  the  centre  of  a  newly  developing  town.  A 
store-keeper  offers  him  a  thousand  dollars  a  year  for 
the  privilege  of  placing  a  store  on  the  land.  The 
owner  of  the  land  need  make  no  exertion.  He  sim- 
ply holds  his  title.  Here  a  man  has  labored  for  twenty 
years,  and  saved  ten  thousand  dollars,  by  denying 
himself  the  necessaries  of  life.  He  invests  the  money 
in  railroad  bonds,  and,  someone  insists,  he  thereby 
serves  society.  In  one  sense,  he  does  serve.  In  an- 
other, and  a  larger  sense,  he  expects  the  products  of 
his  past  service  (the  twenty  years  of  labor)  to  yield 
him  an  income.  From  the  day  when  he  makes  his 
investment,  he  need  never  lift  a  finger  to  serve  his 
fellows.  Because  he  has  the  investment,  he  has  in- 
come. The  same  would  hold  true,  if  the  ten  thousand 
dollars  had  been  left  him  by  his  father  or  given  to 
him  by  his  uncle — it  would  still  command  five  per 
cent.  Modern  economic  society  does  not  ask  a  prop- 
erty owner  how  he  became  possessed  of  his  property. 
The  fact  of  possession  is  sufficient  to  yield  him  an 
income. 

The  terms  "service  income"  and  "property  in- 
come" are  mutually  exclusive.  The  direct  return 
which  a  man  secures  for  the  expenditure  of  effort  is 
"service  income."  The  return  which  he  secures  for 
the  ownership  of  property  is  "property  income."  In 
the  first  case,  the  expenditure  of  effort,  and  in  the 
second  case,  the  ownership  of  property,  yield  an  in- 
come return. 

While  there  is  a  fundamental  difference  between 
service  and  property  income,  it  does  not  follow  that 
the  same  individual  may  not  receive  both.  A  teamster 


26  INCOME 

is  paid  twelve  dollars  a  week.  That  sum  represents 
his  service  income.  At  the  same  time,  he  has  seven 
hundred  dollars  in  a  savings  bank.  The  twenty-one 
dollars  interest  paid  each  year  by  the  savings  bank 
to  the  teamster  would  represent  his  property  income. 
The  difference  is  drawn,  not  in  terms  of  people,  or  of 
classes  of  people,  but  in  terms  of  the  relation  between 
the  individual  and  the  industrial  processes.  The 
individual  who  contributes  energy  and  time  to  the 
creation  of  goods  and  services  receives  a  service  in- 
come. The  person  who  owns  a  part  of  the  property 
used  in  production  receives  property  income.  The 
distinction,  from  the  standpoint  of  industry,  is  funda- 
mental. 

While  there  are  no  sharp  class  lines  in  the  United 
States,  it  is  true  that  the  great  majority  of  wage 
earners  and  salary  earners  are  dependent  for  all  prac- 
tical purposes  upon  the  income  which  they  receive  in 
return  for  their  services.  On  the  other  hand,  there  is 
a  group  in  the  community  which  lives  almost  entirely 
upon  the  returns  from  its  investments.  With  these 
two  groups  in  mind,  the  distinction  between  service 
income  and  property  income  appears  to  be  of  immense 
significance. 

777.  The  Basic  Income  Question 

The  basic  income  question  is  one,  not  of  theory, 
but  of  fact.  Marginal  acres,  marginal  dollars  of  capi- 
tal, and  marginal  laborers  may  be  figments  of  the 
economic  imagination,  or  they  may  be  symbols  of  a 
real  economic  distinction.  In  the  city  of  Omaha  or  of 
Portland,  in  the  factories  of  Brockton,  in  the  sweat- 


SERVICE  INCOME  AND  PROPERTY  INCOME          27 

shops  of  Pittsburgh  and  New  York,  in  the  mines  of 
West  Virginia  and  Colorado,  the  marginal  man  is 
missing.  In  his  place  there  are  great  industrial  enter- 
prises engaged  in  the  production  of  economic  goods  of  a 
certain  value.  For  these  goods,  or  these  values,  the 
forces  of  the  community  contend.  In  that  production 
and  in  that  contention  lies  the  real  problem  of  dis- 
tribution. 

The  matter  may  be  made  still  more  concrete.  An 
industry — steel  making,  for  example — takes  raw  ma- 
terials, and  by  the  process  of  manufacture  adds  to 
them  value  equivalent  to  one  hundred  dollars.  What 
part  of  that  hundred  dollars  goes  in  wages  and  salaries 
to  the  workers  in  the  industry?  What  part  of  it 
goes  in  interest  and  dividends  to  the  owners  of  the 
stocks  and  bonds?  The  former  receive  service  income; 
the  latter,  property  income.  What  proportion  of  the 
values  goes  in  either  direction? 

The  income  question,  thus  baldly  stated,  cannot  be 
answered  with  absolute  accuracy.  Up  to  the  present 
time,  most  industries  have  failed  to  issue  public  re- 
ports which  permit  of  a  full  income  analysis.  In  the 
very  near  future  public  bodies  such  as  the  Interstate 
Commerce  Commission,  the  Public  Utilities  and 
Railroad  Commissions,  and  other  similarly  organized 
tribunals,  will  secure  and  compile  such  data.  For  the 
time  being,  almost  the  only  authentic  facts  are  those 
which  have  been  collected  and  presented  by  the  Inter- 
state Commerce  Commission,  and  by  a  few  of  the 
State  Public  Utilities  Commissions. 

The  compilation  of  income  facts  is  a  stupendous 
task,  which  will  never  be  successfully  completed  until 
the  government  takes  it  in  hand.  Meanwhile,  an 


28  INCOME 

individual,  using  the  facts  available,  may  point  to  the 
sharp  distinction  which  is  being  more  and  more  clearly 
drawn  between  income  from  services  and  income  from 
property. 

Many  enthusiasts  have  hoped  that  when  the  facts 
were  compiled  there  would  appear  some  off-hand 
answer  regarding  the  proportion  of  industrial  income 
which  was  paid  for  services,  and  the  proportion  that 
was  paid  for  property  ownership.  "Half  and  half," 
cries  the  agitator.  "Sixty  per  cent,  for  wages,  and 
forty  per  cent,  for  dividends,"  insists  his  more  con- 
servative confrere.  The  most  cursory  study  of  the 
available  facts  reveals  the  groundlessness  of  this  hope, 
and  the  fallacious  nature  of  such  assertions. 

When  all  of  the  income  facts  are  analyzed,  classified, 
and  compiled,  some  government  expert  will  be  able 
to  announce  that  of  the  total  values  created  in  the 
manufacturing  industries,  a  given  percentage  goes 
for  services,  and  another  given  percentage  for  property 
ownership.  At  the  present  time,  however,  the  knowl- 
edge is  but  fragmentary.  The  proportions  vary  from 
industry  to  industry,  and  from  establishment  to  es- 
tablishment. Even  at  the  present  time,  however,  for 
a  given  group  of  establishments,  and  for  certain  indus- 
tries, facts  are  available  which  show  accurately  what 
amount  of  the  values  produced  in  that  segment  of  the 
industrial  process  goes  for  services,  and  what  amount 
goes  for  property  ownership.  A  long  step  toward  an 
authentication  of  this  general  position  is  taken  by  Dr. 
Streightoff.  Although  he  makes  his  statement  inci- 
dentally, placing  it  in  a  foot-note,  he  finds  that  re- 
liable information  is  obtainable  from  official  sources 
showing  the  apportionment  of  services  and  of  property 


SERVICE  INCOME  AND  PROPERTY  INCOME    29 

income  in  several  large  industries.    Dr.  Streightoff's 
note  is  as  follows: 

"Dr.  ^fl^lir,  IP  hie  'Essay  on  the  Present  Distri- 
bution of  Wealth  in  the  United  States/  (pp.  88-92, 
120)  has  concluded  that  in  Basel,  France,  Saxony, 
the  United  Kingdom,  and  the  United  States,  forty 
per  cent,  of  the  national  incomes  goes  to  capital, 
and  sixty  per  cent,  to  labor.  Recent  available  figures 
for  eight  large  American  industries  employing  over 
three  million  laborers,  give  to  capital  a  return  in 
dividends  and  interest  of  $1,276,419,050,  and  to 
labor  in  salaries  and  wages  of  $2,031,402,210,  a  total 
income  of  $3,307,821,260,  of  which  the  share  of  labor 
is  sixty-one  per  cent,  and  that  of  capital  thirty-nine 
per  cent.  That  these  figures  are  typical  of  the  whole 
field  of  American  industry  is  questionable."  * 

An  examination  of  Streightoff's  table  shows  several 
noteworthy  facts.  In  tne  first  place,  all  of  the  data 
relate  to  the  decade  1900  to  1910.  In  the  second  place, 
six  of  the  eight  groups  of  industries  are  ordinarily 
described  as  "public  utilities."  In  the  third  place, 
the  ratio  between  service  income  (wages  and  salaries) 
and  property  income  (interest  and  dividends)  is  far 
from  being  a  constant  factor.  For  the  eight  groups 
of  industries  the  ratio  between  service  income  and 
property  income  is  six  to  four.  Electric  light  and 
power  stations  give  an  opposite  ratio  of  nine  to  six, 
while  the  industrial  combinations  report  a  ratio  of 
one  to  four.  The  really  interesting  thing  about  the 
table  is  the  fact  that  in  1912  an  investigator  was  able 
to  find  eight  groups  of  industries  having  a  combined 

^'The  Distribution  of  Incomes  in  the  United  States,"  F.  H. 
Streightoff.  New  York,  Longmans,  Green  &  Co.,  1912,  p.  44. 


30  INCOME 

capitalization  of  thirty  billions  of  dollars,  all  of  which 
reported  service  income  as  distinct  from  property 
income. 

Many  accounts  are  so  kept  at  the  present  time, 
either  because  business  reasons  demand  it,  or  because 
government  officials  insist  upon  it,  that  the  amounts 
paid  for  property  and  for  service  income  maybe  readily 
ascertained.  Such  accounts  must  provide  the  basis 
for  a  study  of  the  present-day  income  facts.  The 
present  study  1  purports  to  carry  forward,  if  only  for 
a  few  steps,  the  lines  of  income  investigation  which 
have  been  started  by  Hobson,  Cannan,  Spahr,  Streigh- 
toff,  and  the  other  economists  who  are  interested  in 
income  facts. 

IV.  The  Answer  for  Transportation  Agencies 

Among  all  of  the  highly  organized  modern  businesses 
none  are  more  highly  organized  than  the  transpor- 
tation agencies,  particularly  the  railroads.  The 
pioneer  work  in  railroading  once  completed,  railroad 
managers  were  enabled  to  turn  their  attention  to  the 
problems  of  organization  and  administration.  The 
result  of  their  activities  is  a  marvelously  wrought 

1  Throughout  this  study,  the  figures  used  are  for  1909,  1910,  and 
1911,  years  which  were  arbitrarily  necessitated  by  the  availability 
of  the  figures.  The  census  returns  of  the  Thirteenth  Census  are  for 
1909.  Most  of  the  railroad  and  public  utilities  commissions  are  at 
least  two  years  behind  the  calendar  in  the  issue  of  reports.  If  the 
various  groups  of  figures  were  to  be  at  all  comparable,  they  must 
be  selected  with  some  reference  to  the  census  year.  Furthermore, 
the  years  1910  and  1911  seemed  fairly  representative  of  normal 
business  conditions.  All  of  these  reasons  led  to  the  use  of  data  for 
1910  and  1911  whenever  it  was  available.  In  a  few  special  cases 
1912  and  1913  data  were  used. 


SERVICE   INCOME   AND   PROPERTY   INCOME          31 

business  system  which  has  been  investigated,  rounded 
out,  and  standardized  by  public  authorities.  For 
no  group  of  industries  is  the  information  regarding 
property  and  service  income  so  complete  as  it  is  for 
the  railroads. 

The  reader  will  remember  that  the  railroad  is  a 
business  involving  a  particularly  heavy  original  out- 
lay. The  roadbed,  terminals,  rolling  stock,  the  rights 
of  way,  and  other  initial  charges  on  railroad  construc- 
tion are  immense.  Once  made,  these  capital  invest- 
ments are  unusually  permanent.  The  process  of 
making,  however,  involves  a  heavy  expense.  In 
1911,  railroad  operations  brought  the  railroads  of  the 
United  States  a  revenue  of  $2,789,761,669.  From 
other  sources,  such  as  rent  credits,  income  received  on 
the  stocks  and  bonds  of  companies  under  their  control 
and  similar  miscellaneous  sources,  the  income  was 
$7 7, 8 1 5,34s.1  The  total  income  of  the  railroads  from 
all  sources  therefore  was  a  little  more  than  two  and 
three-quarters  billions  of  dollars.  During  the  same 
year  the  total  amount  paid  in  wages  and  salaries 
was  $1,208,466,470,  and  the  amount  of  dividends  was 
$460,195,376, 2  while  the  entire  amount  paid  in  the 
form  of  interest  was  $436,534,419,  making  the  total 
of  $896,729,795  paid  out  in  the  form  of  income  for 
railroad  property  holdings.3 

Thus  of  the  entire  receipts  for  all  of  the  railroads  in 
the  United  States  in  1911,  three-sevenths  was  paid 
in  wages  and  salaries,  and  two-sevenths  in  interest 

1  Statistics  of  the  Railways  in  the  United  States,  1911,  Interstate 
Commerce  Commission,  Washington,  Government  Printing  Office, 

P-  S3- 

2  Ibid,  p.  29.  3  Ibid,  p.  53. 


32  INCOME 

and  dividends.  The  approximate  ratio  between  the 
amount  of  service  income  and  the  amount  of  property 
income  on  the  railroads  of  the  United  States  was 
therefore  3  to  2. 

There  is,  of  course,  considerable  variation  from  one 
part  of  the  country  to  another,  and  from  one  class 
of  railroads  to  another,  in  the  ratio  between  service 
and  property  income.  The  Interstate  Commerce 
Commission  has  divided  the  country  into  three  geo- 
graphical districts, — the  Eastern  District,  the  South- 
ern District  and  the  Western  District.  A  similar 
division  is  made  of  the  railroads  into  three  classes 
based  upon  their  financial  importance.  Class  I  in- 
cludes those  roads  with  gross  operating  revenues  of  one 
million  dollars  or  more.  Class  II  includes  those  roads 
which  have  gross  operating  revenues  of  one  hundred 
thousand  dollars,  but  of  less  than  one  million  dollars. 
Class  III  includes  those  roads  which  have  revenues  of 
under  one  hundred  thousand  dollars.  An  analysis 
of  the  returns  for  the  United  States  by  districts  and 
by  classes  shows  that  while  the  ratio  between  operat- 
ing rail  revenue  and  total  compensation  is  compara- 
tively stationary,  at  about  7  to  3,  the  ratio  between 
the  operating  rail  revenues  and  the  total  amount  paid 
in  interest  and  dividends  varies  considerably.  On 
the  larger  roads  (Class  I)  one-fourth  of  the  operating 
rail  revenues  is  paid  out  in  the  form  of  interest  and 
dividends  in  the  East  and  in  the  South,  while  more 
than  a  third  is  so  used  in  the  West.  The  total  of 
Class  I  roads  shows  a  ratio  between  operating  rail 
revenue  and  total  interest, and  dividends  of  3  to  i. 

A  brief  summary  of  these  facts  compiled  from  the 
reports  of  the  Commission  gives  an  excellent  idea  of 


SERVICE   INCOME  AND   PROPERTY   INCOME 


33 


the  general  ratio  on  which  the  railroads  disposed  of 
the  greater  part  of  the  two  and  three-quarters  billions 
of  gross  earnings  which  they  received  in  1911. 

TABLE  I. — OPERATING  RAIL  REVENUES,  TOTAL  COMPENSATION  AND 

TOTAL  INTEREST  AND  DIVIDENDS,  FOR  CLASS  I  ROADS  AND  FOR  ALL 
OPERATING  ROADS,  IQII 


Class  I       East 

Roads        South.  . . . 
West.. 


Operating 
Rail  Revenue  * 

$1,180,093,370 

405,419,448 

1,107,005,585 


Total 
Compensation  2 

$  543,860,234 
166,891,480 
457,104,180 


Interest  and 
Dividends 3 

$257,962,523 

89,839,941 

413,226,058 


Total..    $2,692,518,403    $1,167,855,894    $761,028,522 


All  East 

Operating  South.  . . . 
Roads        West .  . 


$1,212,471,633 

421,305,872 

1,155,984,164 


558,101,577  $326,063,633 
172,856,304  102,977,019 
477,508,589  467,689,143 


Total..    $2,789,761,669    $1,208,466,470    $896,729,795 

The  figures  for  railroads  show  that  for  each  $100 
paid  in  compensation  $74  is  paid  as  interest  and  divi- 
dends. The  ratio  of  service  to  property  income  with 
railroad  industry  is  therefore,  roughly,  4  to  3. 

These  facts  derived  from  a  general  survey  of  the 
aggregate  figures  for  the  large  roads  of  the  United 
States  may  be  checked  and  supplemented  from  various 
other  sources.  In  addition  to  the  reports  published  by 
the  Interstate  Commerce  Commission,  there  are  a 
number  of  States  which  publish  reports  on  the  rail- 
roads operating  within  the  State  boundaries,  and 

1  Statistics  of  the  Railways  in  the  United  States,  1911,  Interstate 
Commerce  Commission,  Washington,  Government  Printing  Office, 

P-  55- 
*  Ibid,  p.  29.  *  Ibid,  p.  41. 


34  INCOME 

upon  certain  railroads  whose  lines  enter  the  State.1 
Two  of  the  State  Railroad  Commissions  publish  re- 
turns for  several  of  the  larger  railroad  systems.  The 
following  table  contains  figures  for  a  number  of  sys- 
tems, compiled  from  the  reports  of  the  Minnesota  and 
Iowa  Commissions.2 

TABLE  II. — OPERATING  REVENUES,  TOTAL  COMPENSATION  AND  TOTAL 

INTEREST    AND    DIVIDENDS    FOR    CERTAIN     RAILROAD    SYSTEMS, 
IQII  AND  1912 

Total  Ratio  be- 
Yearly  Total  In-  tween  Service 
Operating       Compen-  terest  and  and  Property 
Revenues          sation  Dividends  Income 
Chicago,  Burling- 
ton and  Quincy  $88,272,000  $35,548,000  $17,545,000  2-1 
Chicago  and 
Northwestern.  . .  74,918,000    32,754,000  18,558,000  n-6 

Rock  Island 65,082,000     27,398,000  12,570,000  5-2 

Great  Northern ...  61,214,000    22,525,000  24,018,000  11-12 

Northern  Pacific ..   63,424,000    24,198,000  27,020,000  6-7 

Iowa  Central 3j5*i,537      1,560,000  630,000  5-2 

Santa  Fe 89,164,217    34,741,000  27,936,000  5-4 

A  glance  at  the  last  column  of  the  table  in  which  a 
rough  estimate  is  made  of  the  ratio  of  service  income 
to  property  income  will  show  the  variation  which 
always  appears  when  individual  establishments  are 
compared.  The  ratio,  for  all  of  the  roads,  between 
operating  revenues  and  compensation  is  fairly  uni- 
form, ranging  from  3  to  i  in  the  case  of  the  Great 

1  "Annual  Report  of  the  Public  Service  Commission  of  New 
York,  First  District,"  1911,  Volume  II. 

2  "Annual  Report  of  the  Minnesota  Railroad  Commission,"  1913. 
Minneapolis,  1913,  pp.  265-314.    Also  the  "Annual  Report  of  the 
Board  of  Railroad  Commissioners  of  Iowa,"  1911.     Des  Moines, 

PP-  339-413- 


SERVICE  INCOME  AND   PROPERTY  INCOME          35 

Northern,  and  Iowa  Central,  to  2 %  to  i  in  the  case 
of  the  other  roads.  The  ratio  between  revenues  and 
the  amounts  paid  in  interest  and  dividends  shows  no 
such  uniformity.  For  the  Chicago;  Burlington,  and 
Quincy  the  ratio  of  service  income  to  property  income 
is  2  to  i ;  for  the  Northern  Pacific  it  is  6  to  7.  Be- 
tween these  two  extremes  fall  the  other  roads.  This 
table  shows  this  very  clearly, — that  while  a  general 
statement  may  be  made  regarding  the  relation  be- 
tween operating  revenue  and  compensation  for  some 
of  the  larger  Western  railroads,  no  such  statement 
will  hold  for  the  ratio  between  compensation  and 
amount  paid  in  interest  and  dividends. 

This  fact  is  further  emphasized  by  some  additional 
figures  showing  the  ratio  between  operating  income 
and  total  interest  and  dividends  (in  none  of  these 
cases  were  the  figures  for  total  compensation  avail- 
able). The  Lake  Shore  and  Michigan  Southern  re- 
ports an  operating  income  of  $48,452,126;  dividends 
of  $8,999,298;  and  interest  of  $6,379,832.  This  would 
make  the  ratio  between  operating  income  and  prop- 
erty income  3  to  i.1  The  New  York  Central,  with 
operating  revenue  of  $100,741,601,  reports  the  pay- 
ment of  $18,868,966  in  property  income,  a  ratio  of 
5  to  i ; 2  the  Pennsylvania,  with  operating  revenue  of 
$157,234,107,  reports  the  payment  of  $26,096,471  in 
property  income,  a  ratio  of  6  to  i ; 3  and  the  Delaware, 
Lackawanna,  and  Western,  with  an  operating  revenue 

1  "Annual  Report  of  the  Michigan  Railroad  Commission,  1911." 
Lansing,  1912,  pp.  199-208. 

2  "Annual  Report  of  the  Public  Service  Commission  of  New  York, 
Second  District,"  1911,  Volume  III. 

*  Idem. 


36  INCOME 

of  $35,947,066,  reports  the  payment  of  $6,028,800 
in  dividends  (6  to  i).1 

The  railroad  facts  are  well  authenticated  and  fairly 
complete.  For  all  of  the  leading  roads,  three-sevenths 
of  the  operating  rail  revenues  is  paid  for  compensa- 
tion, and  two-sevenths  is  paid  for  interest  and  divi- 
dends. The  railroads  of  the  United  States  in  1911 
had  completed  the  lines  of  a  well-defined  picture  of 
income  values.  Under  the  then  existing  arrangements, 
the  owners  of  railroad  property  were  receiving  about 
two-thirds  as  much  as  the  people  who  do  the  work  of 
the  railroads. 

The  information  regarding  the  other  transportation 
industries  is  less  satisfactory.  There  were  in  the 
United  States  in  1912,  30,317  telephone  systems  re- 
porting an  annual  income  of  more  than  $5,000,  with 
1,228,935  miles  of  wire  and  1,402,844  telephones.2 
The  total  income  of  these  systems  was  $255,081,234. 
Of  this  total,  $96,040,541  was  paid  out  in  the  form  of 
salaries  and  wages,  $20,163,960  in  the  form  of  interest, 
and  $34,120,809  in  the  form  of  dividends.  The  sur- 
plus was  $17, 205, 516. 3  In  the  telephone  business  the 
service  income  is  almost  twice  as  great  as  the  property 
income. 

The  land  telegraph  systems  of  the  United  States 
report  for  1912  3  gross  receipts  of  $52,337,211.  Sal- 
aries and  wages  are  reported  as  $23,797,980,  interest 

1 "  Annual  Report  of  the  Public  Service  Commission  of  New 
York,  Second  District,"  1911,  Volume  in. 

2  Bureau  of  the  Census,  Bulletin  No.  123,  "Telephones  and  Tele- 
graphs, 1912."  Washington,  Government  Printing  Office,  1914, 
p.  18. 

1  Ibid,  p.  19.  *  Ibid,  p.  25. 


SERVICE   INCOME  AND   PROPERTY   INCOME          37 

as  $1,608,593,   and  dividends  as  $3,139,861.     The 
ratio  of  service  to  property  income  is  here  about  5  to  i. 
The  data  for  express  companies  collected  by  the 
Interstate  Commerce  Commission  shows —  1 

Operating  revenue $76,198,754 

Other  income 51633,792 


Total  income $81,832,546 

The  total  payments  for  interest  were  $950,407;  for 
dividends  out  of  current  income,  $5,928,104;  out  of 
surplus,  $26,775,727,  making  a  total  payment  in 
property  income  of  one- third  of  the  total  income.  The 
dividend  payments  out  of  surplus  were  swelled  by  a 
$24,000,000  dividend  paid  by  the  Wells-Fargo  Com- 
pany. The  credit  balance  carried  from  income  to 
balance  sheet  was  $59,215,601. 

The  Iowa  Railroad  Commission  furnishes  two  other 
classes  of  instances  in  which  both  service  and  property 
incomes  are  available.  There  are  terminal  railway 
companies  in  Iowa  which  report  the  payment  of 
$329,049  in  wages  and  salaries,  and  $37,553  in  interest 
and  dividends.2  The  total  operating  receipts  are  com- 
paratively small, — slightly  more  than  $200,000  from 
rail  operations  with  additions  from  rents  of  various 
kinds.  The  ratio  between  service  and  property  in- 
come here  is  very  much  higher  than  that  in  the  case 
of  railroad  companies.  The  Iowa  report  also  contains 
an  analysis  of  accounts  of  five  bridge  companies  with 

1  Statistics  of  Express  Companies  for  1910,  Interstate  Commerce 
Commission.     Washington,  Government  Printing  Office,  1912,  p.  15. 

2  "Annual  Report  of  the  Railroad  Commissioners  of  Iowa,"  op.  tit., 
pp.  483-498. 


38  INCOME 

a  total  capital  of  $i2,625,8oo.1  The  income  is  derived 
from  rail  operations,  joint  facilities,  interest,  and  mis- 
cellaneous sources.  During  1911  the  total  compensa- 
tion paid  was  $41,443,  the  total  amount  of  dividends 
$331,464,  and  the  total  amount  of  interest  $87,500. 
Therefore  the  ratio  of  service  to  property  income  is 
i  to  10.  No  conclusion  can  be  drawn  from  these 
instances.  They  are  inserted  here  merely  because  they 
indicate  the  extent  of  the  variation  which  may  occur 
between  service  and  property  income. 

The  transportation  business  differs  from  many  other 
businesses.  The  gross  receipts  cover  the  return  for 
service  in  its  various  forms,  and  there  is  no  such  deduc- 
tion from  them,  as  there  is  in  manufacturing,  for  raw 
materials.  At  the  same  time,  the  total  amount  of 
capital  invested  per  employe  is  comparatively  high, 
because  of  the  great  initial  charge  involved  in  railroad 
construction.  Approximately  half  of  the  gross  receipts 
of  transportation  agencies  are  paid  out  in  the  form  of 
service  income  (wages  and  salaries).  An  amount  is 
paid  in  the  form  of  interest  and  dividends  varying  with 
the  industry  and  the  individual  establishment. 

V.  The  Answer  for  Municipal  Utilities 

Another  five  years  of  investigation  and  of  compila- 
tion by  public  utilities  commissions  will  bring  to- 
gether data  regarding  the  income  from  municipal 
utilities  (street  car  service,  gas,  electric  light,  and 
water)  as  complete  as  those  which  now  exist  for  the 
railroads.  At  present,  the  data  are  fragmentary  in 
character.  The  Bureau  of  the  Census  has  compiled, 

1  "Annual  Report  of  the  Railroad  Commissioners  of  Iowa,"  op. 
cit.,  pp.  504-516. 


SERVICE   INCOME  AND   PROPERTY  INCOME          39 

once  in  five  years,  a  complete  series  of  reports  for  the 
electric  railways  of  the  United  States,  showing  the 
operating  earnings,  and  dividends  and  interest  paid, 
as  well  as  wages  and  salaries.  For  1912,  the  gross 
income  of  the  street  and  electric  railways  of  the  United 
States  was  $585, 930,517. 1  The  amount  paid  for  wages 
and  salaries  was  $200,890,939,  while  the  total  amount 
of  dividends  was  $70,992,218,  and  the  total  amount 
of  interest  was  $113,259,470.  From  these  figures  it 
appears  that  one-third  of  the  gross  income  on  street 
and  electric  railways  goes  to  the  payment  of  service 
income,  and  almost  an  equal  amount  to  the  payment 
of  property  income.  The  ratio  between  service  in- 
come and  property  income  is  therefore  10  to  9. 

In  passing,  it  maybe  noted  that  on  the  street  railway 
lines  the  interest  charges  exceed  the  dividends — the 
ratio  between  the  two  is  4  to  3 .  The  ratio  for  the  steam 
railroads  of  the  United  States  was  reversed  in  1911 
(460  millions  of  dividends  and  437  millions  of  interest). 
In  both  cases  the  primary  capital  outlay  is  heavy. 

A  few  State  reports  cover  the  same  ground  as  that 
included  in  the  Federal  report.  The  Maine  Railroad 
Commission 2  reporting  upon  the  operations  of  fifteen 
street  railways  in  the  State,  makes  it  appear  that 
the  ratio  of  service  and  property  income  is  approx- 
imately the  same  in  Maine  as  for  the  country  at  large. 
One  Minnesota  street  railway  (the  Minneapolis  and 
St.  Paul  Company)  with  operating  revenues  of  $444,- 
504,  reports  the  payment  of  $170,733  in  total  yearly 
compensation,  and  of  $58,445  in  interest  and  divi- 

1  "Street  and  Electric  Railways,  1912,"  Special  Report  of  the 
Census.     Washington,  Government  Printing  Office,  1914,  p.  66. 
1  "Annual  Report  for  1912,"  op.  cit.,  pp.  10-32. 


40  INCOME 

dends.  The  proportion  of  service  to  property  income 
is  in  this  instance  almost  exactly  3  to  i.1  A  ratio  ap- 
parently exists  between  operating  revenues,  and  serv- 
ice and  property  income  on  street  railways  similar  to 
that  for  steam  railroads.  As  in  the  case  of  railroads, 
there  are  variations  in  the  ratio  between  service  and 
property  income  from  one  establishment  to  another. 

The  data  for  other  public  utilities  are  far  less  satis- 
factory than  those  available  for  street  and  electric 
railways.  In  New  York,  it  appears  that  the  pay- 
ments of  property  income  slightly  exceed  the  pay- 
ments for  service  income.  The  Wisconsin  Railroad 
Commission  reports  on  the  operating  revenues  and 
the -payments  for  interest  and  dividends  of  certain 
public  utilities  in  19 n.2  For  gas  utilities,  the  ratio 
is  4  to  i ;  for  electric  utilities  it  is  3  to  i ;  for  water 
utilities  it  is  4  to  i.  The  financial  reports  of  in- 
dividual companies  yield  similar  results. 

The  relation  between  the  service  income  and  prop- 
erty income  paid  by  municipal  utilities  differs  little 
from  that  in  the  railroad  industry.  There  are  a  few 
instances  in  which  the  payments  of  property  income 
exceed  the  payments  of  service  income.  In  general, 
however,  the  conclusions  which  apply  to  the  railroads 
are  equally  applicable  to  public  utilities. 

VI.  The  Answer  for  Manufacturing  Industries 

The  manner  in  which  the  values  created  in  manu- 
facturing industries  are  disposed  of  is  far  less  clear 

1  "Annual  Report  of  the  Minnesota  Railroad  Commission,  1911," 
op.  cit. 

2  "Annual  Report  of  the  Railroad   Commission  of  Wisconsin, 
1910-11."    Madison,  1912,  Volume  II,  Part  IV. 


SERVICE  INCOME  AND  PROPERTY  INCOME         41 

than  it  is  in  the  case  of  transportation  and  of  public 
utilities.  The  books  are  similarly  kept;  the  facts 
could  be  made  as  readily  accessible,  yet  to  date,  there 
has  been  little  effort  to  collect  and  analyze  them. 

The  only  accurate  up-to-date  information  on  the 
relation  between  service  and  property  income  is  that 
contained  in  a  few  scattered  reports  on  individual 
industries.  These  figures  are  necessarily  indicative 
rather  than  conclusive. 

Three  important  companies  engaged  in  the  manu- 
facture of  iron  and  steel  make  reports  which  permit 
of  analysis  into  service  and  property  income.  The 
Bethlehem  Steel  Corporation  in  its  report  for  1913  1 
shows  the  payment  of  $2,846,583  in  interest  and  divi- 
dends, and  $13,993,417  in  wages  and  salaries.  At  the 
same  time,  the  net  earnings  were  eight  and  three- 
quarters  millions  of  dollars,  of  which  $1,528,785  was 
applied  for  depreciation,  and  $2,214,517  appeared  as 
surplus.  The  amount  paid  in  service  income  is  almost 
four  times  as  great  as  the  amount  paid  in  property  in- 
come, but  the  amount  of  interest  and  dividends,  plus 
the  amount  set  aside  for  additions  to  capital,  plus  the 
surplus,  is  equal  to  half  the  amount  paid  for  services. 

The  earnings  of  the  United  States  Steel  Corporation 
and  of  the  Republic  Iron  and  Steel  Company  were 
analyzed  in  great  detail  in  the  recent  Federal  Report 
on  the  Steel  Industry.2  For  1911,  the  total  receipts 
of  the  United  States  Steel  Corporation  from  all 

1  "Ninth  Annual  Report  of  the  Bethlehem  Steel  Corporation  for 
year  ending  December  31,  1913." 

2  "Report  on  Conditions  of  Employment  in  the  Iron  and  Steel 
Industry,"  United  States  Bureau  of  Labor,  1912.     Washington,  Gov- 
ernment Printing  Office,  1913.     Vol.  3,  Chapter  XI. 


42  INCOME 

sources  were  $618,911,430.  Of  this  amount,  26  per 
cent,  was  paid  out  for  wages  and  salaries,  16  per  cent, 
was  paid  out  as  interest  and  dividends,  and  i  per  cent, 
was  set  aside  as  surplus.  The  ratio  of  service  to  prop- 
erty income  is  therefore  3  to  2.  Unfortunately  the 
interest  charges  includes  depreciation,  replacement, 
and  sinking  funds.  In  this  connection  it  is  interesting 
to  note  that  in  1911,  while  $161,419,000  was  paid  in 
wages  and  salaries,  the  undivided  surplus  of  the  steel 
corporation  was  $156,275,000,  an  amount  almost 
equal  to  the  total  paid  in  wages  and  salaries  during 
that  year.1 

The  Republic  Iron  and  Steel  Company  for  1911, 
with  total  receipts  of  $24,071,771,  charged  34  per 
cent,  to  wages  and  salaries,  13  per  cent,  to  dividends 
and  interest  (including  depreciation  and  interest 
charges) ,  and  had  a  surplus  of  3  per  cent,  of  the  total 
receipts.2  The  ratio  of  service  to  property  income  is 
here  3  to  i. 

The  material  giving  directly  the  amount  paid  by 
manufacturing  industries  in  service  and  in  property 
income  is  meager  in  the  extreme.  There  are,  however, 
two  sources  from  which  some  information  on  the  sub- 
ject may  be  gleaned.  The  Census  data  on  manufac- 
ture give  for  all  industries  and  for  specific  industries 
the  total  value  of  products  and  the  total  payments 
for  wages  and  salaries.  These  figures  show  the  rela- 
tion between  gross  value,  or  value  added  by  manufac- 
ture, and  service  income.  Several  States  publish 
like  data.  On  the  other  hand,  a  body  of  information 

1  "Report  on  Conditions  of  Employment  in  the  Iron  and  Steel 
Industry,"  op.  cit.,  p.  277. 

2  Ibid,  p.  279. 


SERVICE   INCOME  AND  PROPERTY  INCOME         43 

exists  in  those  corporation  reports  which  gives  gross 
income  and  total  payments  for  interest  and  dividends. 
From  these  figures  total  property  income  may  be 
ascertained.  The  two  sets  of  figures  certainly  can- 
not be  compared.  Both,  however,  are  suggestive. 

The  value  of  all  products  produced  by  manufactur- 
ing industries  in  1909  was  twenty  and  three-quarters 
billions  of  dollars.1  The  value  added  by  manufacture 
was  $8,572,527,000.  The  total  amount  charged 
against  "services"  (a  term  under  which  the  Census 
includes  all  salaries  and  wages)  was  $4,376,000.  Thus 
almost  exactly  half  of  the  value  added  by  manufac- 
ture was  paid  out  in  the  form  of  salaries  and  wages. 
The  reader  will  remember,  by  way  of  comparison,  that 
slightly  less  than  half  of  the  operating  rail  revenues 
of  railroads  was  paid  out  as  service  income. 

The  ratio  between  value  added  by  manufacture 
and  total  payment  for  services  is  not  at  all  uniform  in 
the  different  manufacturing  industries.  Indeed,  the 
variation  is  many  times  greater  than  that  shown  by 
the  statistics  of  railroads.  While  the  ratio  is  2  to  i 
in  the  manufacturing  industries  at  large,  it  stands  33 
to  i  in  the  manufacture  of  distilled  liquors,  and  20  to 
19  in  the  case  of  general  shop  construction  by  railroad 
companies.  A  table  of  the  thirty-five  industries  in 
which  the  value  of  the  products  for  1909  is  reported 
to  exceed  seventy-five  million  dollars,  shows  that  for 
the  most  part  the  relation  between  the  value  added 
by  manufacture  and  the  total  amount  paid  for  services 
remains  fairly  constant,  varying  between  5  to  2  and 
5  to  3.  In  this  entire  group  of  industries  there  are 
six  instances  in  which  less  than  two-fifths  of  the  value 

1  "Abstract  of  the  Thirteenth  Census  of  the  United  States,"  p.  437. 


44  INCOME 

added  by  manufacture  is  paid  out  in  the  form  of  serv- 
ice income,  and  five  instances  in  which  more  than 
three-fifths  of  the  value  added  by  manufacture  is 
paid  out  in  the  form  of  service  income. 

There  are  a  number  of  State  bureaus  of  labor  which 
publish  information  regarding  the  total  receipts  from 
manufacturing,  the  cost  of  materials  and  supplies, 
and  the  total  amount  of  wages  paid.  Unfortunately, 
there  are  no  instances  in  which  the  States  report  the 
amount  of  salaries  as  well  as  the  amount  of  wages. 

The  State  of  Oklahoma  furnishes  information  re- 
garding its  manufacturing  industries  for  191 1.1  Dur- 
ing that  year  the  total  receipts  from  the  sale  of  manu- 
factured products  were  $81,857,149.  The  figures  in 
this  report  show  that  the  cost  of  materials  used  in 
the  manufacturing  industries  of  Oklahoma  is  five- 
eighths  of  the  total  value  of  the  products.  This  pro- 
portion is  the  same  as  that  shown  by  the  United 
States  Census  figures.  Of  the  value  added  by  manu- 
facture, 45  per  cent,  was  paid  in  wages.  If  salaries 
had  been  included  in  this  statement  (they  equal 
about  a  tenth  of  the  value  added  by  manufacture), 
the  ratio  of  value  added  by  manufacture  to  service 
income  would  be  virtually  the  same  as  that  reported 
by  the  United  States  Census. 

New  Jersey  and  Massachusetts  publish  statistics 
showing  the  value  added  by  manufacture  and  pay- 
ments in  the  form  of  wages.  The  figures  for  Massa- 
chusetts vary  somewhat  from  those  of  Oklahoma.2 

1  "Annual  Report  of  the  Department  of  Labor,"  Oklahoma,  1911- 
12.    Oklahoma  City,  pp.  150-153. 

2  "Twenty-fifth  Annual  Report  of  the  Statistics  of  Manufactures," 
1910.    Bureau  of  Statistics,  Boston,  1912,  pp.  2-12. 


SERVICE  INCOME  AND  PROPERTY  INCOME         45 

The  Massachusetts  industries  are  primarily  textile. 
The  wages  paid  in  these  textile  industries  are  lower, 
and  a  smaller  proportion  of  the  value  added  by  manu- 
facture is  paid  to  the  wage  earners.  An  analysis  of 
the  figures  published  by  the  New  Jersey  Bureau  of 
Statistics  1  shows  a  situation  which  differs  very  little 
from  that  recorded  in  the  United  States  Census  and 
in  the  Oklahoma  report.  On  the  whole,  it  may  be 
said  that  the  State  reports  do  not  differ  in  any 
material  way  from  the  figures  published  by  the  latest 
Federal  Census. 

A  generalization  is  permissible  at  this  point.  It 
seems  to  be  true  that  about  one-half  of  the  value  added 
to  the  raw  materials  by  the  American  manufacturing 
industries  is  paid  out  as  wages  and  salaries.  Those 
industries  having  large  capital  investments  report  a 
less  proportion,  while  those  with  a  comparatively 
small  capital  investment  report  a  far  larger  propor- 
tion. Although  the  generalization  does  not  hold  true 
for  specific  industries,  it  does  seem  to  be  borne  out 
by  the  results  obtained  by  State  as  well  as  Federal 
studies. 

The  figures  showing  the  relation  between  gross 
values  or  total  values  created  in  the  manufacturing 
industries,  and  the  payments  for  services  income,  are 
far  less  usable  from  a  statistical  standpoint  than  the 
figures  showing  value  added  by  manufacture.  The 
immense  difference  in  the  net  value  of  raw  materials 
leads  to  wide  differences  in  the  ratio  of  gross  values  to 
service  income.  The  total  figures  from  the  Census 
shows  that  of  the  gross  value  created  in  manufacture, 

1  Bureau  of  Statistics  of  New  Jersey,  1911.  Camden,  1912,  pp.  10- 
26. 


46  INCOME 

the  amount  paid  to  wages  and  salaries  constitutes 
about  one-fifth  for  all  industries.  This  proportion 
seems  to  be  a  representative  one. 

However  desirable  it  might  be  to  reject  these  figures 
for  gross  values  and  adhere  to  the  values  added  by 
manufacture,  the  manner  in  which  most  industrial 
accounts  are  kept  do  not  permit  of  any  such  procedure. 
If  service  and  property  incomes  in  the  manufacturing 
industries  are  to  be  compared,  attention  must  center 
on  gross  returns,  because  that  is  the  only  figure  which 
appears  in  corporation  accounts.  Even  that  is  ab- 
sent from  most  accounts,  or  else  a  complication  of 
accounting  prevents  the  student  from  determining 
the  amount  of  interest  or  of  dividends.  There  are 
a  number  of  manufacturing  industries,  however,  for 
which  the  manuals  publish  fairly  satisfactory  data. 

One  of  the  most  frequently  discussed  companies 
is  the  Pullman  Company.  This  Company,  with  a 
capital  of  $120,000,000  (no  funded  debt)  reports  for 
1912-13  total  revenues  from  all  sources,— 

Sleeping  car  operations $40,103,216 

Auxiliary  operations 1,091,875 

Manufacturing  plant 31,320,181 

$72,415,272 

Net  corporate  income $14,714,704 

Dividends,  1912-13 9,439,769 

Apparently  (for  the  accounts  are  not  entirely  clear) 
the  ratio  between  total  revenues  and  the  amount 
paid  in  dividends  is  8  to  i,  while  the  ratio  between 
total  revenue  and  the  amount  of  net  corporate  income 
is  5  to  i.  In  this  connection  it  is  worth  remembering 
that  although  the  amount  paid  in  dividends  by  the 


SERVICE   INCOME  AND   PROPERTY  INCOME          47 

Pullman  Company  is  only  one-eighth  of  the  gross 
revenues,  the  Pullman  Company  has  increased  its 
capital  from  $18,000,000  to  $120,000,000  by  declaring 
stock  dividends.1  Nowhere  is  there  an  adequate 
statement  to  show  the  proportion  of  gross  earnings 
which  the  Pullman  Company  pays  in  service  income. 
The  ratio  between  gross  earnings,  the  amount  paid 
in  interest  and  dividends,  and  the  amount  set  aside 
as  surplus  by  certain  companies  which  make  fairly 
complete  reports,  appears  in  the  following  table : 

TABLE  HI. — RATIO  OF  GROSS  INCOME  TO  PROPERTY  INCOME  AND  TO 

SURPLUS  IN   CERTAIN  REPRESENTATIVE   INDUSTRIES 

Ratio  of  Gross  Income  to — 
Amount  set 
Interest  and     aside  as 


Company 
American  Locomotive  Company.  . 
American  Woolen  Company  

Year 
1910-11 
1909 
1912 
1912 
1912 
1911 
1910-11 
1910 
1911-12 

Divideti 
20  to 
20  to 
12  to 
7  to 
16  to 

II  tO 

16  to  ] 

12  to  i 

II  tO  ] 

ds      Surplus 
25  to  i 
[         25  to  i 
16  to  i 

t              20  tO  I 

t          50  to  i 
I          14  to  i 
t         30  to  i 
c           3  to  i 
t          50  to  i 

Baldwin  Locomotive  Works  

Dupont  Manufacturing  Company 
General  Baking  Company  

General  Electric  Company  

International  Paper  Company.  .  .  . 
National  Biscuit  Company  

Pittsburgh  Plate  Glass  Company  . 

There  are  a  few  smaller  companies  for  which  the 
figures  are  available.  These  cases,  most  of  them 
among  the  successful  large  manufacturing  concerns, 
illustrate  the  extent  of  the  variation  and  the  general 
ratio  existing  between  gross  income  and  property 
income.  Apparently  from  five  to  ten  per  cent,  of  the 
gross  income  of  such  companies  goes  for  the  payment 

1  "The  Manual  of  Statistics."  New  York  Manual  of  Statistics 
Company,  1913,  p.  735. 


48  INCOME 

of  interest  and  dividends.  It  will  be  remembered  that 
for  all  manufacturing  industries  the  percentages  paid 
in  service  income  was  about  twenty  per  cent. 

The  student  will  note  with  keen  disappointment  the 
lack  of  adequate  data  on  which  to  base  any  general 
statement  of  the  ratio  between  service  and  property 
income  in  the  manufacturing  industries.  That  the 
figures  are  as  readily  obtainable  for  the  larger  manu- 
facturing industries  as  they  are  for  the  railroads  and 
other  public  utilities  goes  without  saying.  They  can- 
not be  worked  out  and  satisfactorily  presented  until  a 
thorough  expert  study  is  undertaken  by  some  official 
body.  Probably  real  enlightenment  in  this  direction 
lies  in  the  creation  of  a  commission  with  powers  like 
those  of  the  Interstate  Commerce  Commission,  to 
compel  the  keeping  of  uniform  accounts. 

For  the  time  being  this  much  may  be  said.  About 
one-half  of  the  total  value  added  to  the  raw  material 
by  the  processes  of  manufacture  is  paid  out  in  the 
form  of  service  income.  The  proportion  paid  to  prop- 
erty if  less,  very  much  less,  in  fact,  although  no  de- 
fensible statement  may  be  made  in  terms  of  figures. 
Of  the  gross  income  from  manufacturing  industries, 
a  fifth  is  paid  out  in  the  form  of  service  income,  and  a 
considerably  less  proportion  takes  the  form  of  prop- 
erty income. 

VII.  Mining,  Smelting,  and  Refining 

Perhaps  the  Michigan  Copper  strike  revealed  a 
unique  example  of  the  relation  between  service  and 
property  income.  At  the  same  time,  the  strike  re- 
sulted in  the  publication  of  some  significant  facts  re- 


SERVICE  INCOME  AND  PROPERTY  INCOME         49 

garding  the  income  situation  in  the  copper  mining 
industry,  and  showed  that  certain  of  the  properties 
were  yielding  immense  returns  on  the  capital  invested. 

The  full  text  of  an  illuminating  report J  throws  into 
the  foreground  the  operations  of  the  Calumet  and 
Hecla  Company,  and  the  companies  which  it  controls. 
The  actual  cash  paid  into  this  company  seems  to  have 
been  $12  per  share  on  100,000  shares,  the  par  value  of 
which  is  $25.  The  Calumet  and  Hecla  Company 
reports  for  1912  $4,364,360  paid  in  the  form  of  interest 
and  dividends,  and  $3,193,073  paid  in  wages.  Exactly 
what  percentage  of  the  total  compensation  this  term 
"wages"  includes,  the  report  does  not  make  clear. 
If  the  ordinary  relation  between  wages  and  salaries 
exists,  from  5  to  10  per  cent.2  should  be  added  to  this 
amount  in  order  that  the  total  amount  paid  in  the 
form  of  service  income  may  be  ascertained.  The 
amount  of  interest  and  dividends  is  considerably  in 
excess  of  the  total  amount  paid  in  wages  and  salaries. 

An  examination  of  appendices  2  and  3  in  the  same 
report  shows  that  while  the  Calumet  and  Hecla  Com- 
pany is  the  largest  and  apparently  by  far  the  most 
successful  of  the  companies  reporting,  there  are  other 
ventures  almost  equally  prosperous.  The  ratio  of 
service  to  property  income  in  the  case  of  the  Calumet 
and  Hecla  Company  is  probably  unique.  At  the  same 
time,  it  is  one  instance,  on  a  huge  scale,  of  an  industry 
which  pays  more  dollars  per  year  to  the  holders  of  the 
property  than  to  the  people  who  carry  on  the  work. 

The  figures  showing  the  relation  between  service  and 

1  "Michigan  Copper  District  Strike,"  United  States  Bureau  of 
Labor,  Bulletin  139.    Washington,  Government  Printing  Office,  1914. 
1  Abstract  of  the  Thirteenth  Census,  Table  no,  pp.  5140*. 


50  INCOME 

property  incomes  in  the  mining  industry  are  far  from 
satisfactory.  The  figures  published  in  the  Thirteenth 
Census  *  show  a  total  value  of  the  production  of  mines 
and  quarries  of  $1,238,410,000.  The  expenses  of  oper- 
ation and  development  were  $1,042,643,000.  This 
total  includes  the  expenditures  for  services,  supplies, 
royalties,  taxes,  contract  work,  rents  of  offices,  and 
the  like.  Apparently  all  of  the  costs  of  the  business 
are  included  except  the  payments  for  interest  and  the 
fund  for  dividends  and  surplus.  The  Census  does 
make  clear  the  relation  between  the  value  of  products 
and  the  costs  of  operation,  on  the  one  hand,  and  the 
payment  for  services  on  the  other.  The  total  expense 
for  services  was  $662,422,000,  or  about  one-half  of  the 
value  added  to  products  and  three-fifths  of  the  total 
cost  of  operation.  Among  the  principal  mining  indus- 
tries the  proportion  of  total  value  of  products  to  service 
income  is  about  2  to  i.  It  is  highest  in  bituminous 
coal  mining  (4  to  3),  and  lowest  in  the  production  of 
petroleum  and  natural  gas  (5  to  i).  For  the  most 
part,  the  ratio  holds  fairly  constant. 

The  Census  report  on  Mines  and  Quarries  for  1902  2 
contained  an  analysis  for  all  incorporated  companies 
showing  the  total  amount  paid  in  wages  and  salaries, 
and  the  total  amount  paid  in  interest  and  dividends. 
The  value  of  products  for  1902  was  $626,132,000;  the 
total  of  wages  and  salaries  was  $338,107,000,  and  the 
total  of  interest  and  dividends  was  $86,02 1 ,000. 3  The 

1  "Mines  and  Quarries,"  1909,  Bureau  of  the  Census.  Washington, 
Government  Printing  Office,  1913,  pp.  334-335. 

*  "Special  Report  of  the  Census  Bureau."    Washington,  Govern- 
ment Printing  Office,  1905. 

*  Ibid,  pp.  68  and  88. 


SERVICE  INCOME  AND  PROPERTY  INCOME    51 

ratio  between  total  value  produced  and  service  income 
was  therefore  about  2  to  i,  and  between  total  value 
and  property  income  9  to  i . 

Such  fragmentary  information  in  the  mining  indus- 
try as  may  be  gathered  from  the  manuals  of  industrial 
statistics  shows  that  the  variation  between  total  earn- 
ings and  property  income  is  extreme.  Few  of  the 
mining  companies  making  reports  have  funded  debts. 
They  are,  for  the  most  part,  capitalized  by  the  issue 
of  stock,  on  which  the  dividends  vary  widely. 

VIII.  Service  and  Property  Incomes 

Anyone  who  sets  out  to  find  for  service  and  prop- 
erty income  a  fixed  rate  which  will  hold  true  for  all 
industries,  or  that  will  hold  true  throughout  any  one 
industry,  is  doomed  to  bitter  disappointment.  No 
such  ratio  exists,  and  in  the  very  nature  of  things,  it 
cannot  exist.  Variations  in  the  conduct  of  individual 
businesses,  and  in  the  character  of  various  classes  of 
businesses,  necessarily  lead  to  the  variations  in  the 
service-property  income  ratio. 

Among  the  great  industries,  about  one-half  of  the 
value  added  by  manufacture,  or  of  the  equivalent  of 
that  term,  is  paid  out  as  wages  and  salaries.  A  less 
proportion — in  many  cases,  considerably  less — is  dis- 
tributed to  stock-and-bond-holders  as  interest  and 
dividends.  Generalizations  can  scarcely  be  made 
more  definite  regarding  the  ratio  between  service  and 
property  incomes. 

A  fixed  formula  between  service  and  property  in- 
come is  not  in  any  sense  indispensable,  however  con- 
venient it  may  be.  The  important  fact  lies  in  the 


52  INCOME 

existence  of  a  demonstrable  relation  between  service 
and  property  incomes. 

Business  accounts  of  to-day  give  no  clue  to  "rent, 
interest,  wages  and  profits."  In  so  far  as  modern 
accounting  is  concerned,  the  terms  as  they  were  used 
by  nineteenth  century  economists  are  obsolete.  In 
their  place  appears  a  new  terminology  including  such 
words  as  "compensation,"  "dividends,"  "interest," 
and  "surplus."  Compensation  is  service  income; 
dividends  and  interest  are  property  income;  surplus  is 
undistributed  income,  or  income — the  distribution 
of  which  has  not  yet  been  determined.  If  the  econ- 
omist is  to  talk  in  terms  that  the  man  of  the  street 
can  understand,  he  must  talk  in  the  language  of  the 
street.  If  he  adopts  this  language,  he  will  make  a 
distinction  between  service  and  property  income  that 
is  clear-cut  and  logical,  on  the  one  hand;  and  that, 
on  the  other  hand,  is  being  consciously  formulated 
and  lived  up  to  by  the  world  of  affairs. 

The  data  for  distinguishing  service  from  property 
income  are  as  yet  incomplete.  Yet  the  logic  of  the 
distinction  seems  no  less  inevitable  than  the  trend 
of  fact  in  that  direction.  As  the  material  aggregates, 
it  will  become  more  and  more  clear  that  the  income 
issues  of  the  next  generation  must  concern  themselves 
with  incomes  from  services,  on  the  one  hand,  and 
incomes  from  property  on  the  other.  The  distinction 
is  vital,  and  it  takes  added  significance  with  each 
passing  year. 


CHAPTER  III 

THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES 

/.  The  Treatment  of  Service  Income 

THERE  is  an  essential  difference  between  "  service " 
income  and  "property"  income  which  necessitates 
an  absolutely  different  method  of  treatment  for  the 
two.  Service  income,  paid  to  the  individual  in  return 
for  some  effort,  exertion,  or  expenditure  of  time  and 
energy,  has  about  it  a  personal  element  that  will  not 
be  gainsaid.  The  wage  earner  receives  a  certain 
wage.  He  receives  it  as  an  individual,  and  because  of 
his  individual  participation  in  some  enterprise.  The 
recipient  of  property  income  secures  a  share  in  the 
values  created  by  production  because  he  owns  prop- 
erty. The  means  by  which  he  secured  the  property 
matters  not  a  whit.  The  personal  element  is  not  at 
issue.  The  best  citizen  in  the  community  may  own 
no  property,  or  he  may  be  possessed  of  a  quarter  of 
all  the  property  in  his  native  town.  The  title  to  prop- 
erty may  lie  with  a  genius,  an  imbecile,  a  cemetery, 
an  orphan  asylum.  In  property  income,  the  personal 
element  has  no  place.  Property  incomes  are  paid  to 
the  holder  of  property  titles,  irrespective  of  personal 
qualities.  Under  the  circumstances,  it  is  possible  to 
treat  service  income  on  an  individual  basis.  Prop- 
erty income  must  be  treated  abstractly.  It  is  pos- 
sible, for  example,  in  the  case  of  service  income  to 

53 


54  INCOME 

state  that,  in  a  given  town,  a  certain  percentage  of 
the  employees  in  the  sugar  refineries  receive  from  $12 
to  $15  per  week.  The  best  that  could  be  said  for 
property  income  would  be  that  the  refineries  paid  a 
certain  sum  in  dividends.  This  payment  might  be 
made  to  ten  or  to  a  thousand  individuals,  depending 
on  the  proportion  of  property  titles  held  by  these  in- 
dividuals. 

Since  the  personal  element  plays  so  large  a  part  in 
service  income,  it  is  comparatively  easy  to  give  a 
personal  interpretation  to  the  problem.  In  fact, 
service  income  is  always  interpreted  personally.  The 
wage  earner  is  said  to  get  too  little  or  too  much.  He 
is  said  to  be  extravagant  or  thrifty.  Such  phrases, 
involving  the  use  of  income,  have  no  place  in  the 
present  discussion.  The  most  that  can  be  done  here 
is  to  inquire  into  the  service  incomes  paid  to  and  re- 
ceived by  various  classes  and  groups  of  income  earners. 

II.  Gainful  Occupations  in  the  United  States 

The  volume  of  the  Thirteenth  Census  dealing  with 
"Occupation  Statistics"  contains  a  general  summary 
of  occupational  returns.  The  Census  enumerators 
"were  instructed  to  return  an  occupation  for  every 
person  engaged  in  gainful  labor"  (page  15).  The  data 
therefore  relate  to  those  persons  rendering  a  service 
for  which  they  received  payment. 

There  are  eight  general  occupations  recognized  by 
the  Thirteenth  Census.  The  names  of  these  occupa- 
tions, the  number  of  persons  engaged  in  them  in  1910, 
and  the  per  cent,  of  persons  in  each  of  the  occupations, 
appears  in  the  following  table: 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      55 

TABLE  IV. — NUMBER  AND  PERCENTAGE  OF  GAINFULLY  OCCUPIED  PER- 
SONS IN  THE  UNITED  STATES,  ENGAGED  IN  EACH  GENERAL  GROUP 
OF  GAINFUL  OCCUPATIONS,  IQIO  l 

Gainfully 

Occupied  Per  Cent. 

Persons    Distribution 

All  occupations 38,167,336  100.0 

Agriculture,  forestry,  and  animal  husbandry   12,659,203  33-2 

Extraction  of  minerals 964,824  2 . 5 

Manufacturing  and  mechanical  industries.  ..   10,658,881  27.9 

Transportation 2,637,671  6.9 

Trade 3,614,670  9.5 

Public  services  (not  elsewhere  classified).  . . .        459,291  i .  2 

Professional  service 1,663,569  4.4 

Domestic  and  personal  service 3»772,i74  9.9 

Clerical  occupations 1j737>°53  4.6 

The  largest  single  group  of  occupations — agricul- 
ture, forestry,  and  animal  husbandry — report  almost 
exactly  one-third  of  those  gainfully  employed.  Among 
the  twelve  and  a  half  million  men  and  women  engaged 
in  this  group  of  occupations  (10,851,702  were  men  and 
1,807,501  were  women),  more  than  half  are,  judged 
from  the  Census  tables,  evidently  employees.  Of 
"farm  laborers"  alone  there  were  5,975,057,  while 
those  persons  engaged  in  forestry  and  the  other  occu- 
pations grouped  together  under  this  heading,  would 
add  considerably  to  the  total  number  of  persons 
working  for  a  wage  or  salary  paid  by  another. 

Agriculture,  with  the  allied  occupations,  remains  as 
the  greatest  single  occupation  group.  However  in- 
complete the  income  return  may  be  from  this  group, 
it  is  unique  both  as  regards  size  and  economic  im- 
portance. 

1 "  Occupation  Statistics,"  Thirteenth  Census,  p  40. 


56  INCOME 

The  entire  business  of  extracting  minerals  involves 
the  work  of  less  than  a  million  persons.  Unlike  the 
agricultural  occupations  just  discussed,  the  extrac- 
tion of  minerals  is  usually  carried  on  as  a  highly 
organized  and  specialized  industry. 

The  second  largest  occupational  group — manufac- 
turing and  mechanical  industries — reports  ten  and  a 
half  million  persons  employed.  The  classification  of 
agricultural  workers  and  mine  workers  was  a  simple 
matter  compared  with  the  classification  of  those  en- 
gaged in  manufacture.  Of  the  total  number,  8,83 7,901 
were  male,  and  1,820,980  were  female. 

The  Census  enumerators  have  made  five  groups 
among  those  engaged  in  manufacturing.  There  are, 
first  of  all,  the  apprentices;  second,  persons  manufac- 
turing outside  of  factories;  third,  laborers;  fourth, 
semi-skilled  operatives;  and  fifth,  persons  having 
trades  or  occupations  which  might  be  classed  as 
skilled.  Despite  the  very  evident  drawbacks,  which 
are  noted  in  the  Census  volume,  to  such  a  classifica- 
tion, the  large  facts  which  this  analysis  of  industry 
shows  stand  out  with  surprising  clearness.  The  five 
groups  tabulated  from  Table  14  of  the  Volume  on 
Occupations  (page  53)  are  as  follows: — 

TABLE  V. — GAINFULLY  OCCUPIED  PERSONS  IN  MANUFACTURING  AND 

MECHANICAL  PURSUITS,  GROUPED  ACCORDING  TO  THE  CHARACTER 
OF  OCCUPATIONS,   IQIO 

Apprentices 118,964 

Workers  not  in  factories 518,912 

Laborers 2,489,706 

Semi-skilled  operatives 2,441,535 

Skilled  persons 4,929,366 

The  total  of  these  figures  does  not  add  to  the  full 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      57 

total  of  the  persons  engaged  in  the  manufacturing 
industries,  because  of  the  return  of  a  round  half 
million  of  persons  whose  occupations  are  "not  other- 
wise specified." 

The  persons  here  classed  as  "skilled  persons"  vary 
considerably  in  the  degree  of  skill.  There  are,  for 
example,  in  this  group  three-quarters  of  a  million  of 
carpenters,  one-half  of  a  million  machinists,  a  third  of 
a  million  painters,  glaziers,  etc.,  and  a  quarter  of  a 
million  stationary  engineers.  Despite  the  variation 
in  the  character  of  work,  all  of  the  occupations  speci- 
fied are  of  a  skilled  nature. 

Apparently,  from  the  analysis  given  above,  more 
than  half  of  those  occupied  in  manufacturing  and 
mechanical  pursuits  fall  outside  of  the  group  that 
might  be  described  as  skilled;  one-fourth  of  the  total 
are  laborers  who  are  engaged  in  work  manifestly  un- 
skilled; another  one-fourth  are  semi-skilled  operatives 
doing  work  of  a  more  or  less  crude  nature. 

Those  persons  who  are  gainfully  employed  in  manu- 
facturing and  mechanical  industries,  in  transportation, 
in  trade,  in  public  service  and  in  clerical  occupations, 
like  those  occupied  in  the  extraction  of  minerals,  are 
at  work,  for  the  most  part,  in  highly  organized  busi- 
nesses where  the  salary  or  wage  relation  is  all  but  uni- 
versal. 

Transportation  involves  the  employment  of  more 
than  two  and  a  half  million  persons,  106,596  of  whom 
are  women.  Again  there  is  a  significant  group  of 
semi-skilled  and  unskilled  workers  who  more  than 
offset  the  brakemen,  conductors,  locomotive  engineers, 
mail  carriers,  and  other  skilled  men  whose  employ- 
ment is  reported.  If  the  draymen,  teamsters,  and 


58  INCOME 

expressmen;  and  hostlers  and  stable  hands;  the  la- 
borers and  the  longshoremen  and  stevedores  are  added 
together,  there  appear  to  be  1,286,157  °f  them.  The 
skilled  occupations  reported  for  the  group  number 
approximately  one  million. 

The  three  million  and  a  half  persons  engaged  in 
trade  (3,136,582  men  and  468,088  women)  are  rather 
evenly  distributed  over  a  number  of  occupations,  with 
the  single  exception  of  retail  dealers,  who  constitute 
a  third  of  the  total  number  of  persons  engaged  in  trade. 
Among  the  principal  classes  of  traders  are  bankers 
and  brokers,  clerks  in  stores,  commercial  travelers, 
delivery  men,  insurance  men,  laborers,  real  estate 
dealers  and  salesmen  and  saleswomen,  taken  together, 
constituting  four-sevenths  of  all  the  persons  occupied 
in  trade. 

The  half  million  persons  engaged  in  public  service 
require  no  comment,  as  they  fall  outside  of  the  scope 
of  the  present  inquiry. 

Professional  services,  with  a  million  and  a  half 
occupied  persons  (929,684  men  and  733,885  women) 
show  up  strangely  beside  some  of  the  other  occupa- 
tion groups.  To  use  the  language  of  the  street,  this 
group  of  persons  occupies  the  headlines  on  the  front 
page  to  an  extent  that  is  out  of  all  proportion  to  its 
relative  numbers.  If  the  school  teachers  are  elimi- 
nated, there  remain  only  a  million  professional  people. 
The  entire  legal  group  contains  but  114,704;  the 
ministerial,  118.018  persons;  the  medical,  151,132. 
The  teachers  number  almost  six  hundred  thousand. 

The  proportion  of  the  sexes  is  reversed  in  domestic 
and  personal  service.  There  are  twice  as  many  women 
as  men  in  this  classification.  Among  the  three  million 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      59 

and  a  half  persons  engaged  in  domestic  and  personal 
service,  three-sevenths  are  servants.  The  remainder 
are  scattered  over  a  large  number  of  forms  of  personal 
work.  There  are  barbers,  doorkeepers,  boarding-house 
keepers,  janitors,  laundry  operatives,  porters,  res- 
taurant keepers,  and  waiters. 

The  final  occupational  group — clerical  occupations 
— contains  agents,  bookkeepers,  clerks  (except  clerks 
in  stores),  messengers  and  office  boys,  stenographers 
and  typewriters.  If  the  clerks  in  stores  were  added  to 
the  group,  its  number  would  be  increased  to  two  mil- 
lion. 

While  this  analysis  of  occupations  in  the  United 
States  may  seem  unduly  extended,  it  is  made  for  the 
purpose  of  bringing  out  certain  facts  fundamental  to 
the  analysis  of  service  income.  It  is  worthy  of  note, 
for  example,  that  a  third  of  those  gainfully  employed 
are  in  agricultural  and  kindred  pursuits,  a  field  for 
which  income  statistics  are  practically  unobtainable. 
It  is  worthy  of  note,  on  the  other  hand,  that  among  the 
remaining  twenty-five  million  persons  gainfully  em- 
ployed, perhaps  fifteen  million  are  making  a  living 
in  highly  organized  business  (this  estimate  makes 
due  allowance  for  the  home  workers,  clerks  in  stores, 
retail  dealers,  salesmen  and  saleswomen,  and  excludes 
all  professional  and  domestic  service).  Within  this 
group  of  persons,  occupied  in  organized  industry, 
perhaps  half  are  doing  work  which  the  Census  de- 
scribes as  skilled  or  semi-skilled.  Excluding  agricul- 
tural occupations,  four-fifths  of  the  gainfully  occupied 
persons  are  working  for  someone  else — are  employed 
for  a  wage  or  a  salary.  The  wage-salary  relation  has 
thus  become  all  but  universal. 


60  INCOME 

///.  Some  Distinctions  between  the  Recipients  of  Service 
Income 

At  the  outset  two  important  distinctions  may  be 
made  between  the  kinds  of  services  for  which  service 
income  is  paid.  There  is,  on  the  one  hand,  the  service 
which  is  rendered  by  those  who  are  engaged  directly 
in  the  productive  processes.  On  the  other  hand,  there 
is  the  personally  rendered  service  which  gratifies 
human  wants  and  relieves  human  needs.  The  first 
form  of  service  results  in  the  production  of  economic 
goods,  which  go  to  the  supplying  (directly  or  indi- 
rectly) of  human  wants.  The  second  form  of  service, 
which  is,  for  the  most  part,  a  direct  supplying  of  hu- 
man wants,  includes  those  personal  services  which 
are  so  essential  a  part  of  civilization. 

The  character  of  direct  personal  service  is  such,  that 
it  is,  for  the  most  part,  unorganized  and  inchoate. 
Individuals  render  it  individually.  The  ' '  professions  " 
are  occupied  with  the  rendering  of  direct  personal 
service  from  one  human  being  to  another.  Because 
of  the  individualistic  nature  of  this  personal  service, 
it  is  extremely  difiicult  to  secure  any  reliable  income 
data  regarding  it. 

The  entire  field  of  personal  direct  service  is  virtually 
closed  to  the  student  of  income.  He  may  enter  it  with 
inferences,  or  guesses,  but  once  there,  he  finds  himself 
without  accurate  data  on  which  to  proceed. 

IV.  One-Man  Industry 

The  classes  of  occupations  cited  by  the  Census  as 
"Agricultural  Pursuits,"  "Extraction  of  Minerals," 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      6 1 

"Manufacturing  and  Mechanical  Industries,"  "Trans- 
portation," "Trade,"  and  some  of  the  "Clerical  Oc- 
cupations," take  the  raw  materials  from  nature's 
storehouse,  convert  them  into  various  forms,  through 
processes  of  manufacture,  transport  them,  oversee 
their  transfer  from  one  ownership  to  another,  until 
they  are  safe  in  the  hands  of  the  consumers.  These 
occupations,  almost  all  of  which  are  concerned  in  the 
production  of  wealth,  lend  themselves,  in  a  number 
of  cases,  to  a  definite  income  analysis. 

There  are,  for  the  purposes  of  the  present  discus- 
sion, two  types  of  industry.  First,  there  is  the  one- 
man  concern  in  which  the  owner  manages,  directs,  and 
works  actively  in  the  business.  The  principal  occu- 
pations in  this  class  are  farming,  and  small  shop- 
keeping.  Manufacturing  has  passed  almost  wholly 
under  the  domination  of  an  organized  industrial  sys- 
tem. The  farmers  constitute  the  largest  remaining 
group  of  small-business  men.  They  are  engaged  in  the 
work  of  the  farm.  They  hire  one,  two,  or,  at  most,  a 
few  assistants.  The  processes  of  agricultural  industry 
are  simple  and  for  the  most  part,  still  unspecialized. 

The  small  shopkeeper,  like  the  farmer,  is  not  an 
extensive  employer  of  labor.  Generally,  he  does  his 
own  work,  depending  for  his  livelihood  on  a  small 
personal  clientele.  He  has  no  business  organization, 
and  manages  his  business  in  a  direct  hand-to-mouth 
fashion. 

The  extent  to  which  manufacturing  industries  are 
being  converted  into  large  scale  units  is  clearly  shown 
by  the  Census  figures.  More  than  four-fifths  of  the 
manufacturing  plants  employ  twenty  (20)  persons  or 
less.  There  are,  in  these  establishments,  only  fifteen 


62  INCOME 

per  cent,  of  the  wage-earners;  on  the  other  hand,  only 
one-twentieth  of  the  establishments  employ  more 
than  100  wage-earners,  yet  there  are,  in  this  one- 
twentieth  of  the  establishments,  two-thirds  of  all  of 
the  wage-earners  employed.  The  figures  showing  the 
amount  of  product  lead  to  similar  conclusions.  The 
manufacturing  business  of  the  country  is  carried  on 
chiefly  in  large  establishments. 

There  is  every  indication  that  the  small  business, 
even  in  agriculture  and  shopkeeping,  is  being  slowly 
superseded,  as  it  has  been  superseded  in  manufactur- 
ing. The  college- trained  farmer  is  specializing,  in- 
stalling expensive  machinery,  and  hiring  farm  laborers. 
The  small  shopkeeper  is  forced  into  competition  with 
chain  stores,  and  other  forms  of  highly  organized  busi- 
ness. The  individual  druggist,  the  small-restaurant 
keeper,  and  the  corner  grocer  will  linger  for  a  long 
time,  but  each  year  they  will  secure  a  smaller  propor- 
tion of  the  business  of  the  community,  because  each 
year,  big  business  in  these  lines  is  securing  a  firmer 
hold. 

There  is  no  way  in  which  the  incomes  of  those 
engaged  in  one-man  industry  may  be  accurately  de- 
termined. In  general,  it  is  true  that  the  incomes  of 
such  men  are  not  large.  In  the  absence  of  business 
organization,  the  returns  are  necessarily  limited  to  an 
amount  which  corresponds  somewhat  closely  to  that 
of  the  marginal  wage  or  salary-earner  working  in  a 
similar  position  and  industry.  This  is  less  true  of 
farmers,  on  the  whole,  than  it  is  of  men  engaged  in 
small  retail  business.  In  both  instances,  however,  it 
is  probably  true  that  the  vast  majority  are  earning 
a  living  about  equal  to  the  living  which  they  would 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      63 

be  able  to  secure  as  wage-earners  in  a  corresponding 
line  of  work. 

There  remain,  for  the  purpose  of  the  present  dis- 
cussion, that  body  of  men  and  women  who  are  en- 
gaged in  organized  industries.  They  constitute  per- 
haps a  third  of  those  who  are  gainfully  employed.  It 
is  about  this  group  of  recipients  of  service  income 
that  the  discussion  centers,  because  it  is  about  them 
that  the  most  accurate  information  is  available. 

V.  The  Distribution  of  Occupations  in  Organized 
Industry 

There  are  a  number  of  sources  from  which  informa- 
tion may  be  secured,  showing  the  distribution  of 
occupations  in  organized  industry.  The  Census  re- 
ports, the  reports  of  the  Interstate  Commerce  Com- 
mission and  the  volumes  issued  as  a  result  of  Federal 
and  State  special  studies,  show  rather  conclusively 
the  existing  situation. 

Broadly  speaking,  there  are  three  types  of  workers 
in  modern  industry.  Type  one  includes  managers, 
superintendents,  executive  and  administrative  offi- 
cials who  are  entrusted  with  the  power  to  direct  in- 
dustrial operations;  type  two  includes  clerks,  book- 
keepers, and  other  persons  on  the  commercial  staff  of 
industry;  and  type  three  includes  those  who  work  for 
wages.  Broadly  speaking,  also,  type  one  is  engaged 
in  the  direction  of  men;  type  two  is  engaged  in  the 
facilitation  of  transactions  and  the  systematizing  of 
industrial  work;  type  three  is  engaged  directly  with 
the  handling  of  economic  goods  or  tangible  wealth. 

A  distinction  is  frequently  made  between  salaries 


64 


INCOME 


and  wages.  Managers,  superintendents,  foremen  and 
clerks  are  salaried  employees.  Other  employed  persons 
paid  by  the  day,  week  or  piece,  are  classed  as  wage- 
earners.  It  is  interesting  to  note  the  small  proportion 
of  modern  industrial  workers  who  receive  salaries. 

Industrial  organization  has  proceeded  to  a  point 
where  the  directors  of  industrial  activity  are  compar- 
atively few,  and  the  wage-earners  comparatively 
numerous.  In  all  of  the  manufacturing  industries 
of  the  United  States,  7,678,578  persons  are  gainfully 
employed.  The  division  of  these  persons  into  classes 
is  illuminating. 

TABLE  VI. — THE  INDUSTRIAL  GROUPING  OF  PERSONS  ENGAGED  IN 

MANUFACTURES,    1909  1 

Class  Total 

All  classes 7,678,578 

Proprietors  and  officials 487,173 

Proprietors  and  firm  members.. .  273,265 

Salaried  officers  of  corporations. .  80,735 

Superintendents  and  managers. .  133,173 

Clerks 576,359 

Wage-earners  (average  number). . .  6,615,046 

Proprietors,  firm  members,  and  salaried  officers 
constitute  a  comparatively  small  group.  The  number 
of  clerks  is  approximately  equal  to  the  number  of 
proprietors,  salaried  officers,  and  superintendents  com- 
bined, while  the  wage-earners  constitute  seven-eighths 
of  the  total  number  of  persons  engaged  in  manufac- 
turing. 

The  Census  Abstract  follows  this  summary  table 
with  a  table  in  which  an  analysis  is  made  of  the  forty- 
three  leading  industries  of  the  country.  A  study  of 
1  Abstract  of  the  Thirteenth  Census,  p.  452. 


Male 

Female 

6,162,263 

1,516,315 

472,914 

14,259 

263,673 

9,592 

78,937 

1,798 

130,304 

2,869 

437,056 

139,303 

5,252,293 

1,362,753 

this  table  shows  that  in  twelve  industries,  the  wage- 
earners  constitute  over  90  per  cent,  of  the  total  number 
engaged,  while  in  thirty-seven  of  the  forty- three  in- 
dustries they  constitute  over  80  per  cent,  of  the  total 
number  engaged.  Those  industries  such  as  the  pro- 
duction of  bread  and  bakery  products,  which  are  still 
run  on  a  small  scale,  show  a  high  proportion  of  officials 
and  a  comparatively  low  percentage  of  wage-earners. 
The  highly  organized  industries,  on  the  other  hand, 
such  as  cotton  goods  and  iron  and  steel  work,  show  a 
very  low  proportion  of  officials  and  a  high  proportion 
of  wage-earners.  This  contrast  is  brought  out  even 
more  effectively  by  the  following  detailed  summary 
of  the  situation  in  four  highly  organized  industries: 

TABLE   VII. — THE  DETAILED   INDUSTRIAL  GROUPING  OF  PERSONS 

ENGAGED  IN  FOUR  LEADING  MANUFACTURING  INDUSTRIES, 

Proprietors  and  Officials 


Pro- 
prie- 
tors 
and 
Firm 

Sala- 
ried 
Offii- 
cials 
of 

Super- 
intend- 
ents 
and 

Wage- 
earners 

Wat 
earn 
(A: 

No 

;«- 

crs 
>S- 
.) 

Total 

Mem- 

Corpo- 

Mana- 

(Avg. 

PC, 

r 

Industry 

Number 

Total 

bers 

rations 

gers 

Clerks 

No.) 

Get, 

\t. 

Boots  and  shoes, 

including     cut 

stock  and  find- 

in  ^ 

215,923 

5,752 

1,838 

1,027 

2,887 

11,874 

Io8  2Q7 

or 

g 

Cotton  goods,  in- 

* y  *•*  i  *  y  / 

y-L  , 

cluding    cotton 

small  wares  .  .  . 

387,771 

4,461 

377 

1,726 

2,358 

4,430 

378,880 

97. 

7 

Foundry        and 

machine  -  shop 

products  

615,485 

31,605 

9,851 

9,348 

12,406 

52,869 

531,011 

86, 

3 

Iron    and    steel, 

steel  works  and 

rolling  mills.  .  . 

260,762 

4,286 

47 

779 

3,460 

16,400 

240,076 

92. 

I 

For  the  most  part,  the  proprietors  and  salaried 
officials  (the  real  heads  of  industry)  are  a  vanishingly 

1  Abstract  of  the  Thirteenth  Census,  p.  453. 


66  INCOME 

small  proportion  of  the  number  occupied  in  the  manu- 
facturing industries.  Although  there  is  a  considerable 
variation  from  industry  to  industry,  the  fact  remains 
that  the  wage-earners,  in  most  organized  industries 
constitute  over  nine-tenths  of  the  total  number, 
while  wage-earners  and  clerks  together  constitute  in 
the  neighborhood  of  ninety-five  per  cent,  of  the  whole. 

The  most  highly  organized  industry  in  the  United 
States  is  undoubtedly  the  railroad  industry.  In  this 
industry,  the  proportion  of  general  officers  to  total 
employees  is  less  than  in  any  manufacturing  industry 
of  which  there  is  a  record.1  The  general  officers  are 
two  in  seven  hundred.  The  general  and  other  officers 
are  six  in  seven  hundred.  The  railroad  business  has 
been  evolved  to  a  point  where  less  than  one  man  in  a 
hundred  is  an  officer  in  any  sense  of  the  word.  The 
remainder  (more  than  ninety-nine  in  a  hundred)  are 
subordinates. 

The  figures  for  several  other  industries  are  at  hand. 
They  will  not  be  stated  in  detail  because  they  corre- 
spond closely  to  the  facts  already  cited  for  the  manu- 
facturing industries.  Among  the  1,139,332  persons 
engaged  in  the  mining  industry,  49,374  were  pro- 
prietors and  officials;  24,675  were  clerks  and  other 
salaried  employees;  1,065,285  were  wage-earners. 
There  is  thus  one  proprietor  and  official  for  every 
twenty  wage-earners.  This  proprietor-and-official 
group  analyzed  shows  29,922  proprietors  and  firm 
members,  5,657  salaried  officers  of  corporations,  and 
X3>795  superintendents  and  managers.2  Among  the 

1  "Statistics  of  Railways  in  the  United  States,"  1911,  op.  cit.,  p.  27. 
1  "Mines  and  Quarries,"  1909,  "Thirteenth  Census  of  the  United 
States,"  Volume  XI,  p.  28. 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      67 

282,461  persons  attached  to  street  and  electric  rail- 
ways in  the  United  States,  23,271  were  salaried  em- 
ployees, and  259,190  were  wage-earners.  The  term 
"salaried  employee"  as  here  used  includes  clerks,  etc. 
The  ratio  of  salaried  employees  to  wage-earners  is  one 
to  ten.1 

The  facts  for  organized  industry  are  clear  and  un- 
mistakable. The  tendencies  of  present  industrial 
growth  point  in  the  direction  of  more  complex 
organization,  and  a  decrease  in  the  proportion  of 
persons  who  are  managing  their  own  businesses, 
together  with  a  corresponding  increase  hi  the  propor- 
tion of  persons  who  are  working  on  a  wage  or  salary 
basis.  Already  the  great  industries  such  as  rail- 
roading, the  public  service  corporations,  and  the  more 
highly  developed  manufacturing  enterprises  have 
reached  a  point  where  less  than  a  tenth  of  the  persons 
gainfully  occupied  in  such  industries  are  above  the 
grade  of  clerks  and  wage-earners.  Over  nine-tenths 
of  those  engaged  in  modern  organized  industry  are 
underlings — clerks  and  wage-earners. 

VI.  The  Possibilities  of  a  Service  Income  Study 

The  possibilities  for  a  study  of  service  income  are 
narrowed,  materially,  by  the  lack  of  available  facts. 
Individualistic  occupations,  such  as  those  of  profes- 
sional people,  persons  rendering  domestic  and  per- 
sonal service,  are  of  so  personal  a  nature  that  income 
facts  are  difficult  to  obtain  for  them.  Similarly,  one- 
man  or  small  scale  industries  such  as  farming  and 

x"  Street  and  Electric  Railways,"  1912.  Bureau  of  the  Census, 
Bulletin  124,  p.  66. 


68  INCOME 

shopkeeping  offer  no  facts  to  the  student  of  income. 
There  remain  the  incomes  of  persons  engaged  in  or- 
ganized industry. 

The  income  facts  for  organized  industry  do  not 
compensate  for  the  absence  of  facts  in  other  direc- 
tions. However,  the  facts  for  organized  industry  are 
more  desirable  than  any  other  income  facts  because 
they  are  typical  of  the  direction  in  which  industry 
is  moving.  Sooner  or  later,  the  major  portion  of 
gainful  occupations  will  be  organized.  The  facts  for 
present-day  organized  industry  are  therefore  signif- 
icant and  prophetic. 

The  facts  for  organized  industry  are  indicative  as 
well  as  prophetic.  Some  crude  relation  undoubtedly 
exists  between  the  incomes  received  for  services  in 
organized  industry  and  the  incomes  of  persons  doing 
similar  work  in  one-man  industry.  This  statement 
of  economic  theory  has  little  statistical  foundation, 
though  it  has  the  backing  of  experience  in  individual 
cases.  Wages  for  similar  work  do  not  show  any  great 
variation  *  from  one  organized  industry  to  another. 
A  similar  relation  doubtless  holds  between  personal 
service  and  one-man  business,  on  the  one  hand,  and 
organized  industry  on  the  other. 

The  most  shocking  thing  about  the  distribution  of 
occupations  in  modern  industry  is  the  overwhelm- 
ing proportion  of  clerks  and  wage-earners.  The  per- 
centage of  men  higher  up  is  minute. 

The  only  valuable  service-income  facts  relate  to 

clerks  and  wage-earners.     There  are  no  adequate 

figures  showing  the  salaries  of  officials  and  minor 

officers.    Again  the  most  wanted  facts  are  at  hand, 

1  "Wages  in  the  United  States,"  op.  cit.,  Chapter  8. 


THE  OCCUPATIONS  OF  THOSE  RENDERING  SERVICES      69 

because  the  clerks  and  wage-earners  make  up  the 
great  body  of  persons  engaged  in  rendering  services 
in  organized  industry. 

The  distribution  of  occupations  among  income 
earners  shows  the  clerks  and  wage-earners  to  be  the 
numerically  powerful  group.  The  next  concern  must 
be  with  their  wage  rates. 


CHAPTER  IV 

SERVICE   INCOME   IN   ORGANIZED   INDUSTRY  * 

7.  Salaries  and  Wages 

THE  data  at  hand  furnish  an  indication,  though  an 
incomplete  one,  of  the  way  in  which  income  is  appor- 
tioned among  the  people  who  are  engaged  hi  organized 
industry.  After  all,  it  is  in  them  that  the  most  per- 
manent interest  must  center.  Outside  of  agriculture, 
they  constitute  the  major  part  of  the  population. 

"Values  to  the  extent  of  $100  are  paid  to  'labor'  in 
the  form  of  'compensation'  or  of  'wages  and  salaries.' 
How  is  this  $100  actually  divided  up  among  those 
who  participated  in  its  production?  "  The  answer  to 
that  question  cannot  as  yet  be  made  final;  to  the  care- 
ful searcher  after  truth  it  is  far  from  satisfactory;  yet 
those  who  have  eyes  to  see  will  find  in  it  many  sug- 
gestions of  the  situation  which  will  stand  revealed 
when  all  of  the  facts  in  the  case  are  made  available 
for  study. 

The  first  large  fact  encountered  in  the  analysis  of 
service  income  is  the  distinction  between  salaries  and 
wages.  Although  this  distinction  is  arbitrary,  it  is 
significant  for  two  reasons.  First,  because  the  incomes 
of  "officers"  and  "salaried  employees"  are  often 
very  much  higher  than  the  incomes  of  "wage-earners"; 
and  second,  because  in  a  large  number  of  important 
publications  dealing  with  service  income,  the  incomes 

1  Much  of  the  material  in  this  chapter  appeared  in  the  Popular 
Science  Monthly. 

70 


SERVICE  INCOME   IN   ORGANIZED  INDUSTRY        71 

of  wage-earners  alone  are  given,  while  in  other  cases 
the  data  frequently  contain  statements  for  salaries 
and  wages.  In  the  main,  the  emphasis  will  be  laid 
upon  wages,  first,  as  a  matter  of  necessity — there  is 
no  analysis  of  compensation  which  shows  salaries 
with  the  same  minuteness  that  wages  are  set  forth. 
Second,  as  a  matter  of  choice — the  wage-earners, 
being  an  overwhelming  majority  of  the  whole,  con- 
stitute the  bulk  of  the  human  income  problem  in 
industry. 

The  contrast  between  the  amount  paid  to  salary- 
earners  and  to  wage-earners  is  in  some  cases  con- 
siderable, and  in  others  it  is  far  less  marked.  Crude 
average  figures  alone  are  available  for  this  comparison, 
because  there  is  nowhere  any  statement  of  classified 
earnings  for  "officers." 

The  Iowa  Railroad  Commission  reports  several 
instances  in  which  the  compensation  paid  to  officers 
is  not  much  greater  than  that  paid  to  wage-earners. 
The  general  officers  of  the  Iowa  Terminal  Companies  1 
receive  an  average  daily  compensation  for  one  com- 
pany of  $7.67,  and  for  another  company  $4.38,  while 
for  the  same  companies  the  average  daily  compensa- 
tion of  all  other  employees  ranges  from  $1.95  to  $2.55. 
The  Iowa  Bridge  Companies  2  report  an  average  daily 
compensation  for  general  officers  of  $4.32,  and  for  all 
other  employees  $2.01.  These  companies  are  small, 
and  the  variation  between  the  returns  to  the  officers 
and  wage-earners  is  probably  typical  of  that  existing 
in  many  small  businesses. 

The  railroads  of  the  country  report  a  divergence 
between  the  compensation  of  general  officers  and  of 

1  "Annual  Report  for  1911,"  op.  cit.,  p.  498.  *  Ibid,  p.  516. 


72  INCOME 

other  employees  which  is  considerable.  For  all  operat- 
ing railroads  in  the  United  States,  the  average  daily 
compensation  of  general  officers  was  $12. 99.*  For 
Class  I  roads  (annual  earnings  over  $1,000,000)  the 
average  is,  in  the  Eastern  District  $19.52;  in  the 
Southern  District,  $14.63;  and  in  the  Western,  $16.63. 
In  Class  II  and  Class  III  roads  the  average  is  much 
lower.  "The  other  officers"  (there  were  in  1911 
5,628  "general  officers"  and  10,196  "other  officers" 
on  all  operating  roads)  received  an  average  daily 
compensation  of  $6.27.  For  Class  I  roads  the 
average,  as  before,  was  somewhat  higher  than  for 
Class  II  and  III  roads.  Although  the  compensa- 
tion rates  for  "other  officers"  do  not  greatly  ex- 
ceed the  rates  for  the  best-paid  wage-earners,  the 
rates  of  pay  among  general  officers  is  much  higher 
than  for  the  wage-earners.  With  the  exception  of 
enginemen,  conductors,  and  machinists,  no  group  of 
railroad  employees  receives  an  average  daily  com- 
pensation of  more  than  $3.00  a  day.  For  conductors 
and  enginemen  it  is  $4.16  and  $4.79  respectively,  and 
for  machinists,  $3.14.  Most  of  the  employees  are 
paid  an  average  daily  compensation  of  about  $2.00. 
Although  the  facts  are  most  readily  usable  in  the 
railroad  industry,  an  examination  of  the  figures,  from 
street  and  electric  railways,  mines  and  quarries,  tele- 
graph and  telephone  companies,  and  manufacturing 
industries  tends  to  confirm  the  general  impression 
made  by  the  railroad  statistics.  For  small  concerns, 
and  for  second-grade  officers,  the  rate  of  return  is  not 
greatly  in  excess  of  the  rate  for  the  better-paid  wage- 

1  "Statistics  of  the  Railways  of  the  United  States,"  1911,  op.  cit., 
p.  28. 


SERVICE   INCOME  IN  ORGANIZED  INDUSTRY        73 

earners.  The  general,  or  first-class,  officers  who  are 
responsible  for  large  enterprises  do  receive,  as  a  group, 
a  rate  of  return  which  is  ordinarily  from  five  to  ten 
times  greater  than  the  rate  paid  to  wage-earners. 

There  is  another  point  of  great  significance  which 
must  be  borne  in  mind  in  this  connection.  The  salaries 
of  general  officers  are  high  in  individual  instances, 
nevertheless  the  aggregate  of  salaries  paid  is  small  as 
compared  with  the  entire  amount  of  service  income. 
Thus  on  the  railroads  the  total  compensation  of  both 
general  and  other  officers  was  about  $40,000,000  in 
1911.  This  constituted  only  about  3  per  cent,  of  the 
total  compensation  paid  during  the  year  to  all  classes 
of  employees.  If  to  the  salaries  of  all  officers  are  added 
the  total  salaries  of  office  clerks,1  the  entire  salary 
schedule  for  the  railroads  covers  8  per  cent,  of  the  total 
amount  paid  in  compensation.2  The  same  situation 
exists  in  street  railways.  All  street  and  electric  rail- 
way salaries  amount  to  approximately  $13,000,000 
which  is  9  per  cent,  of  the  total  amount  paid  for  com- 
pensation.3 The  Census 4  reports  the  payment  of 
$4,366,000,000  for  services  in  the  manufacturing  in- 
dustries. Of  this  amount,  $939,000,000,  or  more  than 
a  fifth,  was  expended  for  salaries.  Officers  of  cor- 
porations received  a  quarter  of  this  salary  expenditure; 
'superintendents  and  managers  another  quarter,  and 
clerks  and  other  subordinate  employees  received  a 

1  This  computation  is  made  because  of  general  usage  by  virtue  of 
which  clerks  are  paid  by  the  month.     Their  yearly  earnings  are 
usually  less  than  those  of  the  better-paid  wage-earners. 

2  Supra,  p.  29. 

3  "Street  and  Electric  Railways,"  1907,  op.  cit.,  p.  195. 

*  "Thirteenth  Census  of  the  United  States,"  Volume  VIII.  Wash- 
ington, Government  Printing  Office,  1913,  p.  129. 


74  INCOME 

half.  If  individual  industries  are  examined,  however, 
it  appears  that  in  highly  organized  businesses  like 
the  production  of  iron  and  steel,  of  railroad  cars  and 
locomotives,  of  agricultural  implements,  and  the  like, 
the  relation  of  salaries  to  total  compensation  is  es- 
sentially the  same  as  that  for  railroads.  The  figures 
for  mines  and  quarries  l  show  $39,000,000  paid  in  all 
kinds  of  salaries,  as  compared  with  $370,000,000  paid 
in  wages.  Again  the  figures  appear  as  about  10  per 
cent.  General  officers  received  one-fifth  of  the  forty 
millions,  or  about  2  per  cent,  of  the  whole;  superin- 
tendents, managers,  and  foremen  received  three-fifths, 
and  clerks  one-fifth  of  the  total  salary  expenditure. 
For  those  organized  industries  in  which  figures  are 
available,  it  would  seem  that  the  general  officers  re- 
ceive less  than  one-twentieth  of  the  total  amount  paid 
in  compensation,  while  all  salaried  persons  (general 
officers,  other  officers,  and  clerks)  receive  about  a 
tenth  of  the  total  payments  in  the  form  of  compensa- 
tion. This  generalization  holds  true  for  large,  highly 
organized  industries.  In  the  smaller,  less  specialized 
industries,  the  proportion  which  the  salary  account 
bears  to  the  total  payments  for  compensation  is  per- 
haps double  that  in  the  larger  industries. 

The  figures  furnish  an  indication  of  the  manner  in 
which  service  income  is  divided  between  those  who 
receive  salaries  and  those  who  receive  wages.  When  a 
hundred  dollars  is  paid  in  compensation  by  a  modern 
large-scale  industry,  from  3  to  4  dollars  go  to  general 
officers,  from  6  to  10  dollars  go  to  other  salaried  em- 
ployees (including  clerks),  and  the  great  bulk,  from 

1  "Mines  and  Quarries,"  1902,  Special  Report  of  the  United  States. 
Washington,  Government  Printing  Office,  1905,  p.  91. 


SERVICE  INCOME  IN  ORGANIZED   INDUSTRY        75 

85  to  90  dollars,  is  paid  in  the  form  of  wages  to  wage- 
earners.  This  formula  will  not  hold  good  for  individual 
industries,  but  it  does  express  with  a  considerable 
degree  of  fairness  the  situation  now  existing  through- 
out organized  industry.  Furthermore,  the  fact  should 
not  be  lost  sight  of  that  in  more  highly  organized  in- 
dustries, that  is,  in  the  industries  which  have  evolved 
to  the  point  which  virtually  all  industries  may  be  ex- 
pected to  reach  in  the  process  of  their  development, 
at  least  ninety  out  of  every  hundred  dollars  paid  for 
compensation  goes  in  the  form  of  wages. 

The  point  regarding  the  distribution  of  compensa- 
tion among  salaried  employees  and  wage-earners  is 
not  stressed.  For  the  purpose  of  this  study  no  im- 
portance attaches  to  the  distinction  between  a  wage 
and  a  salary,  since  both  payments  are  made  for  "serv- 
ices." Nevertheless,  since  most  of  the  available 
figures  relating  to  service  income  are  wage  figures, 
the  critical  reader  will  bear  in  mind  the  fact  that  the 
necessity  which  forced  the  use  of  such  material  bears 
every  earmark  of  reasonableness,  since  the  bulk  of 
service  payments  are  made  in  the  form  of  wages. 

II.  The  Incomes  of  Managers,  Foremen,  and  Other 
Under  Officers 

The  data  regarding  the  apportionment  of  incomes 
among  officers  of  all  grades  are  meager  in  the  extreme. 
The  mass  figures  cited  in  the  last  section  give  some 
idea  of  the  general  relation  existing  between  salaries 
and  wages  in  bulk.  They  are  of  no  value  in  an  analysis 
of  income  apportionment  among  individual  salary-  and 
wage-earners. 


76  INCOME 

Figures  showing  the  apportionment  of  income 
among  general  officers  are  apparently  non-existent 
in  any  usable  form.  Even  for  under  officials  the  fig- 
ures are  so  scanty  as  to  be  worthy  of  only  the  most 
cursory  analysis.  The  reason  for  this  paucity  of  data 
is  apparent.  On  the  one  hand,  several  of  the  most 
reliable  sources  (the  reports  of  classified  wages  in 
the  manufacturing  industries  of  Massachusetts  and 
New  Jersey,  for  example)  include  "wage-earners" 
only  in  their  classification.  On  the  other  hand,  much 
of  the  salary  information  relating  to  under  officials  is, 
for  all  practical  purposes,  unclassified.  The  latest 
report  of  the  California  Bureau  of  Labor  Statistics  x 
is  an  excellent  case  in  point.  The  income  classification 
in  that  report  includes,  in  its  last  category,  incomes 
of  $25  per  week  and  over  ($1,300  per  year).  For  each 
city  and  under  each  industry  "superintendents"  or 
"managers"  are  listed,  but  in  nine-tenths  of  the  in- 
stances they  fall  in  this  last  class.  That  they  receive 
more  than  $1,300  per  year  goes  almost  without  saying. 
Exactly  how  much  more  the  report  does  not  state. 

The  figures  showing  the  service  incomes  of  inferior 
officers  on  the  railroads  appear  in  the  form  of  averages 
only.  The  section  foremen,  of  whom  there  were 
44,466  in  1900  2  received  an  average  daily  compensa- 
tion of  from  $1.92  to  $2. 17,  varying  with  the  part  of 
the  country  in  which  they  were  at  work.  The  average 
daily  compensation  of  general  officers  ($12.99)  and 
of  other  officers  ($6.27)  has  already  been  commented 
on.  Apparently  the  railroad  foreman  receives  a  wage 
approximately  the  same  as  that  paid  to  semi-skilled 

1  "Biennial  Report  for  1911-12."    Sacramento,  1912. 
1  "Statistics  of  Railways,"  1911,  op.  cit,,  pp.  26  and  28. 


SERVICE   INCOME  IN   ORGANIZED   INDUSTRY         77 

wage-earners.  The  compensation  paid  to  officers  is 
considerably  greater. 

One  report l  contains  data  of  real  importance  in 
this  connection.  The  most  available  figures  in  this 
report  relate  to  the  Bell  Telephone  System,  from  the 
1908  pay  rolls  of  which  they  were  taken.  Among  the 
Bell  employees  there  were  614  foremen,  one-fifth  of 
whom  received  less  than  $80  per  month  ($960  per 
year),  and  eleven-twelfths  of  whom  received  less  than 
$125  per  month  ($1,500  per  year).  Of  the  total 
number,  only  51  received  more  than  $125  (the  last 
class  appearing  in  the  report).  The  rates  of  pay  for 
assistant  foremen  (39  in  all)  were  much  lower.  Half 
fell  below  $80,  and  all  but  one  below  $125  per  month. 
The  pay  of  general  foremen  was  higher.  Of  the  21 
listed,  half  (10)  received  $125  or  more  per  month.  The 
managers  and  assistant  managers  were  paid  at  ap- 
proximately the  same  rate.  Two-fifths  received  less 
than  $80,  and  four-fifths  less  than  $125.  The  pay  of 
superintendents  is  much  higher.  There  were  only 
three  under  $80,  and  nine  under  $125.  Three-fourths 
(32  out  of  41)  received  $125  or  over. 

The  New  York  Public  Service  Commission  reports 
upon  the  income  rates  of  635  foremen  and  assistant 
foremen  employed  by  gas  and  electric  utilities  in  the 
First  District  of  New  York.  Only  2  per  cent,  received 
less  than  $750;  22  per  cent,  received  less  than  $1,000; 
and  58  per  cent,  received  less  than  $i, 250. 2 

1  "Investigation  of  Telephone  Companies,"  United  States  Bureau 
of  Labor,  Senate  Document,  380,  6ist  Congress,  26!  Session.     Wash- 
ington, Government  Printing  Office,  1910,  pp.  273-289. 

2  "Report  of  the  Public  Service  Commission,  First  District  of 
New  York,"  1911,  Volume  III,  p.  275. 


78  INCOME 

These  figures  are  given  rather  because  they  empha- 
size the  paucity  of  the  data  than  because  they  serve 
any  useful  statistical  purpose.  So  far  as  the  figures 
go,  they  suggest  that  foremen,  assistant  superin- 
tendents, and  assistant  managers  are  paid  salaries 
about  equal  to  those  of  the  best-paid  tenth  among 
the  wage-earners  ($1,000  to  $1,500  per  year).  Super- 
intendents, general  superintendents,  and  general  man- 
agers usually  receive  more  than  $1,500.  It  is  to  be 
hoped  that  before  another  income  study  is  made  there 
will  be  some  authoritative  statement,  at  least  for 
transportation  agencies,  showing  the  classified  in- 
comes of  the  men  higher  up. 

///.  The  Incomes  of  Clerks 

There  seems  to  be  no  very  good  reason  why  clerks 
should  be  classed  among  "salaried  employees"  rather 
than  among  "wage-earners,"  except  that  they  are 
paid  by  the  month.  Nevertheless,  they  are  so  classed 
in  virtually  all  of  the  reports,  including  the  Census 
reports.  For  that  reason  they  are  treated  separately 
in  this  study. 

The  railroad  industry  may  be  passed  by  with  a 
word  of  comment,  since  its  wage  figures  take  the  un- 
desirable form  of  averages.  The  general  office  clerks  l 
(76,513  in  1911)  receive  average  daily  compensations 
of  $2.49.  The  uniformity  of  then*  compensation 
throughout  the  country  is  astonishing  in  view  of  the 
usual  variation  in  wages  between  the  East  and  the 
West.2  In  the  Eastern  District  they  received  $2.56; 

1  "Statistics  of  Railways,"  1911,  op.  tit.,  pp.  26  and  28. 
*  "Wages  in  the  United  States,"  op.  cit.,  Chapter  8. 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY        79 

Southern,  $2.39;  and  Western,  $2.44.  The  other  two 
groups  of  railway  employees  whose  services  might  be 
classed  as  clerical  are  station  agents  (38,277  in  1911), 
and  telegraph  operators  and  dispatchers  (41,196  in 
1911).  Their  daily  compensation  is  very  uniform  with 
that  of  the  clerks.  The  average  for  the  United  States 
was, — station  agents,  $2.17;  and  operators  and  dis- 
patchers, $2.44.  As  in  the  case  of  the  clerks,  the  rate 
of  compensation  varies  only  slightly  from  one  part  of 
the  country  to  another.  Apparently  the  salary  rates 
of  most  men  doing  clerical  work  hi  the  railroad  in- 
dustry lie  somewhere  between  $650  and  $900  per  year. 
The  statistics  furnished  from  the  telephone  industry 
are  worthy  of  some  attention.1  The  total  number  of 
male  clerks  employed  by  the  Bell  System  was  2,650. 
Of  this  number,  one-tenth  received  less  than  $40  per 
month,  one-third  received  less  than  $60,  seven-tenths 
received  less  than  $80,  and  52,  or  about  5  per  cent, 
were  paid  more  than  $125.  For  the  257  male  book- 
keepers the  facts  show  a  slightly  lower  range.  Only  3 
received  over  $125,  while  four-fifths  received  less 
than  $80.  Apparently  in  the  telephone  industry,  as 
represented  by  the  Bell  interests,  the  bulk  of  the 
male  clerical  force  is  paid  from  $600  to  $1,000  per  year. 

The  female  employees  of  the  Bell  System  who  were 
engaged  in  work  of  clerical  grade  are  compensated 
at  a  rate  much  lower  than  that  of  males.  A  little 
more  than  half  (1,015)  °f  the  1,862  female  clerks  were 
paid  less  than  $40  per  month,  while  nineteen-twen- 
tieths  were  paid  less  than  $50.  The  female  "opera- 
tors," who  comprise  the  great  bulk  of  telephone 
employees,  report  similar  wages.  The  telephone  com- 

1  "Investigation  of  Telephone  Companies,"  op.  tit.,  pp.  273-289. 


80  INCOME 

pany,  employing  16,229  operators,  paid  seven-eighths 
of  them  less  than  $40  per  month,  and  all  but  9  of 
them  less  than  $60  per  month.  The  377  female  stenog- 
raphers received  somewhat  higher  wages.  Only  a 
seventh  fell  under  $40,  two-thirds  under  $60,  while  19 
earned  over  $80.  Most  of  the  female  clerical  force 
employed  by  the  Bell  System  received  less  than  $500 
per  year.  A  few  were  paid  more  than  $700. 

The  Public  Service  Commission  of  the  First  District 
of  New  York l  gives  some  excellent  figures  for  the  public 
utilities.  The  street  railways  employ  2  423  male  gen- 
eral office  clerks,  for  whom  the  wage  rates  are  under 
$500  per  year  in  8  per  cent,  of  the  cases,  under  $750 
in  a  quarter  of  the  cases,  and  under  $1,000  in  three- 

1  "Annual  Report  of  the  Public  Service  Commission  of  New  York, 
First  District,"  1911,  Volume  II. 

2  For  convenience  of  comparison,  the  figures  given  in  the  remainder 
of  this  chapter  are  stated,  for  the  most  part,  in  the  following  classi- 
fication: 

Per  Cent,  of  Persons  Receiving  Wage  Rates 
Per  Year  of  Less  Than 

$250  $500  $750  $1,000 

The  percentage  basis  is  substituted  for  the  numerical  basis  because 
it  results  in  greater  clearness.  The  classification  per  year  rather 
than  month,  week,  or  day,  is  adopted,  because  the  figures  appearing 
in  the  reports  as  rates  per  hour,  day,  week,  and  year,  can  be  reduced 
to  a  rate  per  year  more  readily  than  to  any  other  rate.  Observe  that 
these  figures  do  not  represent  earnings  per  day.  No  allowance  is 
made  for  unemployment  in  any  of  its  forms.  The  rate  per  week  or 
per  month  is  multiplied  by  52,  or  by  12  in  order  to  give  a  year  rate. 
The  reduction  of  all  of  the  figures  to  a  common  basis  militates  some- 
what against  their  accuracy  (as  when  a  per  hour  rate  is  converted 
into  a  yearly  rate),  but  adds  greatly  to  their  clearness,  and  compar- 
ability. 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY         8 1 

quarters  of  the  cases.1  The  wage  rates  for  the  gas 
and  electric  utilities  are  very  similar.  Among  1,515 
male  clerks  and  salesmen,  half  received  less  than  $750, 
and  nine- tenths  under  $1,250.  The  ratio  is  similar 
for  other  clerical  employees.  For  cashiers  and  book- 
keepers the  rate  is  higher.2 

The  pay  of  females  doing  clerical  work  in  all  of 
the  New  York  public  utilities  is  very  much  lower 
than  that  of  males.  The  street  railway  general  office 
clerks  receive  less  than  $750  in  four-fifths  of  the  cases. 
Among  the  252  clerks  and  salesmen  employed  by  the 
gas  and  electric  companies,  210  received  less  than 
$750,  and  240  less  than  $1,000  a  year.  The  rate  for 
stenographers  and  typists  is  somewhat  higher,  one 
in  ten  of  them  receiving  over  $1,000  a  year. 

Add  to  these  meager  data  a  few  scattering  instances 
in  which  the  wages  of  clerical  help  are  reported,3  and 
all  of  the  available  evidence  on  the  subject  is  presented. 
Summarized,  they  show  that  those  clerical  occupa- 
tions for  which  data  are  available  pay  wages  at  a 
rate  that  does  not  differ  materially  from  the  ordinary 
wage  rates  of  semi-skilled  and  skilled  labor.  Three- 
quarters  of  the  male  clerks  receive  less  than  $1,000 
per  year,  while  less  than  10  per  cent,  are  paid  more 
than  $1,250.  For  females  the  rates  are  much  lower. 
The  proportion  of  women  who  receive  less  than  $750 
for  clerical  work  is  approximately  the  same  as  the 
proportion  of  men  who  receive  less  than  $1,250.  The 

1  "Annual  Report  of  the  Public  Service  Commission  of  New  York, 
First  District,"  1911,  Volume  II,  p.  334. 

2  Ibid,  pp.  272-274. 

3 "  General  Report  on  Manufactures,"  Thirteenth  Census,  Vol- 
ume VIII,  p.  239. 


82  INCOME 

woman  in  a  clerical  position  who  receives  more  than 
$i  ,000  is  the  exception,  just  as  the  man  who  receives 
less  than  $500  is  the  exception.  At  the  same  time, 
a  large  percentage  of  the  women  receive  less  than  this 
figure,  while  a  considerable  proportion  of  the  men  re- 
ceive more  than  $1,000.  In  only  a  small  proportion 
of  the  instances  does  the  wage  rate  among  male 
clerks  rise  above  $1,250;  in  an  even  smaller  number  of 
instances  do  the  wage  rates  of  female  clerks  rise  above 
$750- 

IV.  The  Incomes  of  Wage-earners  in  Transportation 
and  Commerce 

One  of  the  most  unsatisfactory  situations  revealed 
by  an  analysis  of  wage  statistics  is  the  paucity 
of  the  wage  figures  relating  to  transportation  and 
commerce.  It  is  in  these  fields  that  inquisitorial 
bodies  have  the  greatest  authority;  yet  it  is  in  these 
fields,  strangely  enough,  that  the  wage  statistics  are 
least  usable.  With  the  exception  of  the  Census 
Volumes  for  1912  on  Express,  and  Telephone  and 
Telegraph,  and  of  a  special  report  by  the  Bureau  of 
Labor  on  the  Telephone  Industry,  there  is  little  or 
nothing  of  note. 

The  wages  in  the  railroad  industry,  employing  as  it 
does  more  than  a  million  and  a  half  persons,  are  stated 
only  as  averages.  The  excuse  for  this  statement  of 
railroad  wages  in  terms  of  averages — it  requires  some 
excuse,  for,  though  the  averages  are  given  by  dis- 
tricts and  for  ten  wage-earning  occupations  and  two 
groups  of  miscellaneous  wage-earners,  these  again 
classified  by  districts  and  by  the  class  of  railroads, 
they  are  still  averages,  and  therefore  suffer  under  all 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY        83 

of  the  disqualifications  that  averages  are  heir  to — 
seems  to  be  that  the  length  of  time  worked  and  the 
conditions  of  the  work  done  by  different  employees 
vary  so  greatly  that  no  classified  statement  could  do 
justice  to  the  situation.  Pursuant  of  such  philosophy 
the  Interstate  Commerce  Commission  has  done, 
under  the  circumstances,  the  most  misleading  thing 
that  it  could  possibly  have  done, — that  is,  it  has  pub- 
lished averages;  and  the  State  Railroad  Commissions, 
following  the  footsteps  which,  unknown  to  them, 
led  so  directly  into  this  statistical  quagmire,  also  have 
published  nothing  but  averages. 

Granted  that,  in  the  case  of  railroad  employees,  the 
classified  or  group  system  of  stating  wages  is  inaccu- 
rate, how  much  more  inaccurate  does  the  average 
become?  Instead  of  accepting  errors  at  their  face 
value,  the  average  thus  obtained  compounds  and  aug- 
ments error.  Nor  is  this  a  case  in  which  errors  tend 
to  neutralize  each  other.  What  avails  an  average  of 
the  wages  of  switch  tenders  in  Maine  and  in  Ohio? 
What  avails  an  average  wage  for  "all  other  employees 
and  laborers,"  including  for  the  United  States  nearly 
a  third  of  a  million  men?  The  method  carries  its  own 
refutation.  Except  as  a  basis  of  comparison  from  year 
to  year,  the  figures  are  meaningless  and  absurd. 

The  difficulties  lying  in  the  path  of  obtaining  classi- 
fied wages  for  railroad  employees  do  not  seem  to  be 
so  great  as  the  protesters  claim  them  to  be.  Why 
could  not  the  Interstate  Commerce  Commission  secure 
from  each  railroad  a  statement  for  the  first  week  in 
June  and  December  showing  the  number  of  employees 
of  each  class  who  had  earned  during  that  week  less 
than  $5,  $5  but  less  than  $6,  $6  but  less  than  $7,  $7  but 


84  INCOME 

less  than  $8,  and  so  on  through  the  category?  If  the 
system  of  payment  by  months  is  so  prevalent  as  to 
make  the  weekly  statement  impossible,  a  statement 
for  an  entire  month  would  be  even  more  satisfactory 
than  a  statement  for  a  week  only.  The  time  would 
be  longer  and  the  results  more  representative. 

At  this  point  it  must  suffice  to  say  that  the  average 
figures  for  wages  «on  American  railroads  seem,  for 
the  most  part,  typical  of  the  average  wages  reported 
in  the  manufacturing  and  other  like  industries.  With 
the  exception  of  enginemen,  conductors,  and  ma- 
chinists (who  constitute  9  per  cent,  of  the  total  num- 
ber of  employees,  and  whose  wages  average  in  the 
first  two  cases  over  $4,  and  in  the  last  over  $3),  no 
group  of  employees  reports  an  average  wage  of  more 
than  $3.  For  three  groups  the  average  is  less  than  $2, 
for  three  groups  it  is  between  $2  and  $2.49,  and  for 
three  other  groups  it  falls  between  $2.50  and  $2.99. 
An  analysis  of  average  wages  in  those  manufacturing 
industries  which  are  similar  in  character  to  the  work 
done  on  the  railroad,  shows  that  the  averages  are  ap- 
proximately similar.1  With  the  exception  of  the  three 
high-paid  occupations  mentioned  above,  railroad 
wages  are,  to  all  appearances,  on  a  level  with  other 
wages  in  the  same  community.  The  wage  conclusions 
for  manufacturing  probably  apply  to  railroading. 

The  telephone  and  telegraph  industry  offers  some 
excellent  wage  data.  The  Oklahoma  Department  of 
Labor  publishes  some  figures  on  wages  in  the  tele- 
phone industry.  Of  668  male  wage-earners,  27  per 
cent,  received  less  than  $500;  78  per  cent,  less  than 

1  "Wages  in  the  United  States,"  op.  tit.,  Chapter  7  and  Chapter  9, 
Section  n. 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY        85 

$750;  and  95  per  cent,  less  than  $1,000.  The  wage 
rates  for  females  are  much  lower.  There  were  1,143 
employed.  The  wage  rates  of  17  per  cent,  were  under 
$250,  96  per  cent,  under  $500,  and  99  per  cent,  under 

S750-1 

The  wage  figures  published  by  the  Federal  Bureau 
of  Labor  are  taken  from  the  pay  rolls  of  the  company, 
and  represent  as  accurately  as  wage  figures  may,  the 
situation  on  the  company's  books  in  1908.  In  general, 
the  wage  scale  in  the  telephone  industry  is  much  higher 
than  the  scale  in  most  other  industries.2  The  wages 
in  nine  typical  occupations  (cable  splicers,  chauffeurs, 
drivers  and  stablemen,  installers,  inspectors,  laborers, 
repairmen,  switchboard  men,  testers,  and  trouble 
men)  show  a  considerable  uniformity.3  Only  10  men 
(they  were  all  in  one  class,  "inspectors")  were  receiv- 
ing wages  of  more  than  $125  per  month  ($1,500  per 
year);  two-fifths  received  less  than  $750;  four-fifths 
received  less  than  $2,000.  If  the  laborers  are  elimin- 
ated, the  range  for  the  other  occupations  is  greatly 
advanced.  The  bulk  of  installers,  inspectors,  repair- 
men, switchboard  men,  testers,  and  trouble  men 
receive  wage  rates  of  from  $750  to  $1,000. 

The  figures  for  transportation  permit  of  no  further 
generalization  than  this, — so  far  as  the  data  at  hand 
may  be  relied  upon,  those  occupations  which  have 
counterparts  in  manufacturing  industries  apparently 
pay  similar  rates  of  wages.  At  the  same  time,  there 
are  in  this  field  a  number  of  highly  skilled  occupations 

*"  Annual  Report  of  the  Department  of  Labor  of  Oklahoma," 

I9II-I2,  p.  232. 

2  "Wages  in  the  United  States,"  op.  cit.,  pp.  96-108. 

3  "Investigation  of  Telephone  Companies,"  op.  cit.,  pp.  273-289. 


86  INCOME 

which  pay  wages  far  above  the  usual  run  of  wage 
rates.  Even  in  these  high-paid  occupations,  however, 
only  a  small  proportion  of  male  employees  receive 
over  $1,000;  about  an  equal  proportion  of  female 
employees  receive  over  $750.  Here  and  there  a  male 
employee  is  paid  over  $1,500  per  year,  and  a  female 
employee  over  $1,000  per  year.  These  cases  are  so 
rare  as  to  be  unique. 

V.  The  Incomes  of  Wage-Earners  in  the  Mercantile 
Industry 

The  wage  figures  for  the  mercantile  industry  are 
even  less  conclusive  than  those  for  transportation  and 
commerce.  Their  inconclusiveness  has  far  more  ex- 
cuse for  existence,  however.  Until  recently  the  mer- 
cantile industry  has  been  conducted  on  a  small  scale. 
The  individual  proprietor  is  still  the  dominating  force 
in  many  fields.  In  no  sense  have  the  mercantile 
trades  been  organized  as  the  railroads  and  the  steel 
industry  are  organized.  At  the  same  time,  organ- 
ization is  becoming  the  rule  of  the  road,  and  mer- 
chandising is  rapidly  shaping  itself  into  a  highly 
developed  business.  Meanwhile,  the  meager  data  on 
wages  in  the  mercantile  houses  are  indicative,  though 
not  in  any  sense  conclusive. 

The  last  report  from  California  gives  in  elaborate 
detail  the  facts  regarding  the  wholesale  and  retail 
mercantile  establishments.1  The  contrast  between  the 
wages  of  males  and  of  females  is  sharp  indeed.  While 
only  a  tenth  of  the  males  receive  less  than  $500  per 
year,  and  only  a  third  less  than  $750,  a  tenth  of  the 

x"  Biennial  Report  for  1911-12,"  op.  cit.  Figures  compiled  from 
the  tables. 


SERVICE   INCOME   IN   ORGANIZED  INDUSTRY        87 

females  in  retail  establishments  receive  less  than  $250; 
from  a  fifth  to  two-fifths  receive  less  than  $500;  and 
from  three-fifths  to  four-fifths  fall  under  $750. 

The  wage  rates  for  both  sexes  are  higher  in  whole- 
sale than  they  are  in  retail  establishments.  This  is 
more  true  in  the  case  of  males  than  of  females,  al- 
though it  is  striking  in  both  instances.  It  is  also  in- 
teresting to  observe  that  the  wage  rates  in  San  Fran- 
cisco do  not  differ  materially  from  those  of  Los 
Angeles.1 

TheMassachusetts  Commission  on  Minimum  Wage 
Boards  reports  the  wages  of  3,761  women  and  the 
annual  earnings  of  1,533  wno  were  employed  through- 
out the  year.  Many  of  the  department  store  em- 
ployees not  employed  throughout  the  year,  leave  for 
new  positions,  or  are  laid  off  in  the  dull  season.  All 
but  33  of  the  1,533  women  employed  throughout  the 
year  earned  less  than  $500  per  year.  The  hour  rates  of 
all  of  the  3,761  women  show  practically  the  same  ratio. 

The  other  sources  of  information  yield  similar  re- 
sults. A  well-made  study  of  saleswomen  and  other 
mercantile  employees,  not  including  buyers  or  clerical 
assistants,  was  made  in  Baltimore  by  Elizabeth  B. 
Butler.  The  total  number  of  women  covered  by  the 
investigation  was  4,048.  Of  these  women,  2,184  or 
54  per  cent.,  received  a  rate  of  pay  of  less  than  $250 
per  year,  while  95  per  cent,  were  paid  less  than  $5oo.2 
These  rates  are  apparently  similar  to  the  rates  paid 

1  The  reader  should  bear  in  mind  the  fact  that  wages  in  California 
are  perhaps  a  fifth  or  a  fourth  higher  than  wages  for  corresponding 
occupations  in  the  East. 

2  "Saleswomen  in  Mercantile  Stores,"  E.  B.  Butler,  Baltimore, 
1909.     Charities  Publication  Committee,  New  York,  1912,  p.  113. 


88  INCOME 

in  other  Eastern  cities.1  Comparative  studies  indicate 
that  the  department  store  employees  are  paid  at  a 
higher  rate  than  factory  employees.  Unfortunately 
the  variations  of  age  between  the  two  occupations 
have  not  generally  been  taken  into  account.  An  Illi- 
nois investigation  covering  2,556  department  store 
employees  showed  that  a  twentieth  received  less  than 
a  $250  wage  rate,  and  half  less  than  a  $500  year  rate. 
On  the  other  hand,  a  fifth  of  the  wage  rates  were  over 


It  seems  evident  that  for  most  saleswomen  in 
Eastern  mercantile  stores,  wage  rates  of  more  than 
$500  per  year  ($10  per  week)  are  unusual.  The  great 
bulk  of  them  are  paid  at  the  rate  of  from  $250  to  $500 
per  year. 

VI.  The  Incomes  of  Wage-Earners  in  Certain  Manu- 
facturing Industries 

Whatever  their  failure  to  provide  adequate  statis- 
tics covering  wages  in  other  gainful  occupations,  State 

1  See  the  following:  "Hours,  Earnings,  and  Employment  of  Wage- 
earning  Women  in  the  District  of  Columbia,"  op.  cit.,  pp.  22  and  23; 
"Report  of  the  Iowa  Bureau  of  Labor  Statistics,"  1912-13.    Des 
Moines,  1914,  pp.  i22ff.;  "Hours,  Earnings,  and  Conditions  of  Labor 
in  Indiana  Mercantile  Establishments,"  United  States  Department 
of  Labor,  Bulletin  160.  Washington,  1914,  pp.  3iff.;  "Report  of  the 
Special  Commission  on  the  Conditions  of  Wage-earning  Women  in 
Connecticut,"  Special  Public  Document.   Hartford,  1913,  pp.  2345.; 
"Wages  and  Hours  of  Labor  in  Mercantile  Establishments  in  Ohio," 
Report  No.  i,  Department  of  Investigation,  Industrial  Commission 
of  Ohio.    Columbus,  1914,  pp.  8  and  9;  "Report  of  the  Wage-earning 
Women  in  Kansas  City,"  Board  of  Public  Welfare,  Bureau  of  Labor 
Statistics,  pp.  72-76. 

2  "Biennial  Report  of  the  Bureau  of  Labor  Statistics,"  Illinois, 
1008.    Springfield,  1910,  pp.  413-592. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY        89 

and  Federal  authorities  have  vied  with  one  another 
in  their  efforts  to  prepare  wage  statistics  for  the  manu- 
facturing industries.  Convenience  leads  to  a  grouping 
of  the  figures  for  manufacturing  industries  into  three 
classes.  Those  for  special  industries,  such  as  steel, 
textiles,  etc. ;  and  those  for  certain  States  which  pub- 
lish the  best  wage  statistics;  and  those  published  by 
the  Census  Bureau. 

The  past  three  years  have  added  materially  to  the 
wage  statistics  for  special  industries.  The  public  de- 
mand for  facts  which  arose  out  of  labor  disturbances, 
and  the  activity  of  certain  public  commissions  vested 
with  inquisitorial  power,  has  led  to  the  collection  of 
considerable  wage  data  of  the  greatest  value.  These 
data  are  peculiarly  important  because  in  many  cases 
the  investigation  has  been  made  from  the  pay  rolls  of 
the  company  or  industry  in  question.  In  certain  cases 
these  pay  roll  data  have  been  extensively  compared 
with  pay  envelopes.  The  purposes  of  this  section  will 
be  served  by  a  review  of  only  the  most  important  of 
the  recent  wage  investigations. 

The  most  complete,  and  in  all  ways  the  most  satis- 
factory, of  the  recent  studies  is  that  of  the  iron  and 
steel  industry,  appearing  in  four  volumes.1  Each 
occupation  in  the  steel  industry  was  carefully  studied. 
The  investigation  included  plants  in  every  part  of 

1  "Report  on  Conditions  of  Employment  in  the  Iron  and  Steel 
Industry  in  the  United  States,"  in  four  volumes,  6zd  Congress,  ist 
Session,  Senate  Document,  no.  Washington,  Government  Printing 
Office,  1911-13,  Vol.  I.  See  also  "Wages  and  Hours  of  Labor  in  the 
Iron  and  Steel  Industry,"  1907-12,  United  States  Department  of 
Labor,  Bulletin,  151.  Washington,  1914;  "Wages  and  Hours  of  Labor 
in  the  Building  and  Repairing  of  Steel  Railroad  Cars,"  United 
States  Department  of  Labor,  Bulletin  137.  Washington,  1914. 


9O  INCOME 

the  country,  and  was  minute  and  painstaking  in  the 
last  degree.  In  so  far  as  the  wage  figures  are  impor- 
tant at  this  point,  they  may  be  briefly  summarized  as 
follows:  The  investigation  covered  172,706  employees; 
their  wage  rates  per  year  (computed  from  the  per  hour 
rates  given  for  May,  1910)  were  under  $500,  8  per 
cent.;  under  $750,  60  per  cent.;  under  $1,000,  85  per 
cent.;  and  under  $1,500,  97  per  cent.1  These  rates 
are  somewhat  higher  than  the  rates  previously  derived 
for  Bethlehem,2  where  the  wage  rates  for  that  one 
plant  were  (January,  1910)  hi  a  third  of  the  instances 
less  than  $500  per  year,  in  two-thirds  of  the  instances 
less  than  $625,  and  in  only  8  per  cent,  of  the  instances 
$1,000  and  over.  In  explaining  this  difference  allow- 
ance must  be  made  for  the  fact  that  the  Bethlehem 
works  are  in  a  small  city,  while  many  of  the  plants 
are  located  in  great  centers  of  population. 

Although  the  wages  in  the  iron  and  steel  industry 
are  higher  than  the  wages  paid  in  many  American  in- 
dustries, they  seem  fairly  representative  of  the  situa- 
tion in  those  branches  of  manufacturing  which  afford 
employment  to  men  only.  In  the  industry  where 
women  as  well  as  men  are  employed,  the  wage  scale 
is  usually  lower.  The  wage  formula  for  the  steel  in- 
dustry may  be  taken  as  a  representative  of  the  man- 
employing  industries. 

Labor  troubles  and  tariff  controversies  have  com- 
bined to  attract  public  attention  to  the  wage  rates 

1  "Summary  of  Wages  and  Hours  of  Labor  in  the  Iron  and  Steel 
Industry,"  United  States  Department  of  Labor,  Senate  Document, 
301,  62d  Congress,  ad  Session.  Washington,  Government  Printing 
Office,  1912. 

1  "Wages  in  the  United  States,"  op.  cit.,  pp.  108-112. 


SERVICE   INCOME   IN  ORGANIZED   INDUSTRY         9 1 

paid  in  the  textile  industries,  consequently,  the  data 
for  these  industries  are  now  fairly  well  authenticated. 
The  Tariff  Board  made  an  extensive  investigation 
of  wage  rates  in  the  cotton  industry.1  The  informa- 
tion, secured  from  76  establishments,  covered  18.67 
per  cent,  of  all  cotton  spinning  and  weaving  employees 
enumerated  by  the  Census  (p.  633).  An  arbitrary 
division  between  Northern  and  Southern  mills  draws 
a  line  of  marked  distinction  as  to  wages.  Among  the 
males  sixteen  years  of  age  and  over,  in  the  North  5 
per  cent.,  and  in  the  South  22  per  cent.,  received  a 
wage  rate  of  less  than  $250  per  year.  Half  of  the 
Northern  men  and  over  four-fifths  of  the  Southern 
men  were  paid  at  a  rate  of  less  than  $500  per  year. 
The  highest  wage  rate  in  the  schedule  was  twenty- 
eight  cents  per  hour  (about  $750  per  year).  In  the 
North  6  per  cent.,  and  in  the  South  3  per  cent.,  earned 
more  than  this  amount.  The  figures  for  women  range 
much  lower  than  the  figures  for  men.  The  highest 
class  in  the  women's  schedule  is  eighteen  cents  per 
hour  (about  $500  per  year).  In  the  North,  one-fifth, 
and  in  the  South,  two  per  cent.,  receive  more  than 
this  amount. 

These  wage  rates  for  the  cotton  industry  are  similar 
to  those  for  the  woolen  and  worsted  industry.  The 
Tariff  Board  reports  for  dyeing  and  finishing  woolens 
and  worsteds  z  that  the  wages  of  male  dyers  are  in 

1  "Report  of  the  Tariff  Board  on  Cotton  Manufactures,"  62d  Con- 
gress, 2d  Session,  House  Document  643.    Washington,  Government 
Printing  Office,  1912,  Volume  II,  pp.  637-651. 

2  "Report  of  the  Tariff  Board  on  Schedule  K,"  House  Document 
342.    Washington,  Government  Printing  Office,  1912,  Volume  II, 
pp.  810-811. 


92  INCOME 

four-fifths  of  the  cases  under  $500,  and  in  nine-tenths 
of  the  cases  under  $700.  The  highest  wage  class  given 
in  this  schedule  is  twenty-five  cents  per  hour  (about 
$700  per  year).  Eight  per  cent,  of  the  male  dyers,  15 
per  cent,  of  the  male  finishers,  and  3  per  cent,  of  the 
female  finishers  received  wage  rates  above  that 
amount.  This  investigation  is  obviously  faulty  in  the 
comparatively  small  proportion  of  the  employees  in- 
cluded. It  is  suggestive,  however;  and  corroborated 
as  it  is  by  the  records  of  other  investigations,  it  must 
go  almost  unchallenged. 

The  report  on  the  wages  in  the  woolen,  worsted,  and 
cotton  mills  of  Lawrence,  Mass.  1  (November,  1911), 
is  corroborative,  for  one  town,  of  the  general  situation 
as  suggested  by  the  Tariff  Board's  report.  Half  of  the 
men  received  a  wage  rate  of  less  than  $500;  seven- 
eighths,  of  less  than  $600.  More  than  four-fifths  of  the 
women  fell  in  the  group  under  $500,  and  94  per  cent, 
received  less  than  $600.  The  schedule  grouped  all 
earnings  above  $600  in  one  class.  These  figures  repre- 
sent the  actual  earnings  of  males  and  females  eighteen 
years  of  age  and  over  during  one  month  in  1911. 

Similar  wage  figures  were  compiled  for  the  textile 
mills  (largely  hosiery  mills)  of  Little  Falls,  N.  Y.2 
These  figures  represent  actual  earnings  during  parts  of 
September,  1912.  Among  the  total  of  males  employed, 
three-fifths  earned  at  the  rate  of  less  than  $500,  while 

1  "Report  on  the  Strike  of  Textile  Workers  in  Lawrence,  Mass.," 
Charles  P.  Neill,  Senate  Document  870,  620!  Congress,  20!  Session. 
Washington,  Government  Printing  Office,  1912,  p.  74. 

2  "The  Little  Falls  Textile  Dispute,"  New  York  State  Department 
of  Labor,  Advance  Report  of  the  Bulletin  for  March,  1913.  Albany, 
i9I3>PP- 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY        93 

nine- tenths  earned  at  the  rate  of  less  than  $750  per 
year.  Of  the  2,736  women,  99.8  per  cent,  earned  at 
the  rate  of  less  than  $750  per  year,  while  three-quarters 
fell  below  $500.  This  period  under  investigation  is 
described  by  the  report  as  one  of  normal  working 
conditions. 

The  inferences  from  these  figures  for  special  towns 
are  corroborated,  in  large  measure,  by  the  Special 
publications  of  the  United  States  Department  of 
Labor,  dealing  with  the  textile  industry.  These 
figures,  while  incomplete  and  open  to  question,  be- 
cause of  the  uncertainty  as  to  the  manner  in  which 
the  factories  and  employments  under  consideration 
were  selected,  are  nevertheless  suggestive  of  the 
general  situation.  In  the  cotton  industry,  three-fifths 
of  the  males,  and  four-fifths  of  the  females  received 
wage  rates  of  $500  per  year;  while  97  per  cent,  of  the 
males,  and  99  per  cent,  of  the  females  had  wage  rates 
of  less  than  $750  per  year.1  The  wage  rates  in  the 
woolen  industry  are  considerably  higher,  though  at 
about  the  same  level  as  that  for  the  special  reports. 
The  wage  rates  reported  for  the  textile  industries  in 
Massachusetts  and  New  Jersey  amply  confirm  the 
results  derived  in  these  special  investigations.2 

1  "Wages  and  Hours  of  Labor  in  the  Cotton,  Woolen,  and  Silk 
Industries,"   United   States  Department  of  Labor,   Bulletin   128. 
Washington,  Government  Printing  Office,  1913,  pp.  30-34. 

2  See  also  "Wages  and  Regulations  of  Employment  in  the  Dress 
and  Waist  Industry,"  United  States  Department  of  Labor,  Bulletin 
146.    Washington,  1914;  "Wages  and  Hours  of  Labor  in  the  Hosiery 
and  Underwear  Industry,"  United  States  Department  of  Labor, 
Bulletin  154.    Washington,  1914;  "Wages  and  Hours  of  Labor  in  the 
Cotton,  Woolen  and  Silk  Industries,"  United  States  Department  of 
Labor,  Bulletin  150.    Washington,  1914. 


94  INCOME 

The  textile  industries  show  an  unusually  low  wage 
scale.  Practically  none  of  the  men  receive  more  than 
$1,000;  with  the  exception  of  woolen  finishers,  only 
a  tenth  receive  more  than  $750.  Among  the  women 
the  rates  are  even  lower.  For  them  a  wage  over  $750 
is  not  found  much  oftener  than  once  in  a  hundred 
times,  while  a  wage  of  less  than  $500  is  paid  in  three- 
fourths  or  four-fifths  of  the  cases. 

While  so  many  data  have  been  compiled  for  textiles, 
the  other  industries  have  not  been  neglected.  A 
number  of  wage  figures  are  available  for  lumber  and 
kindred  industries.  The  Tariff  Board  published  a 
report  on  the  wages  for  certain  selected  occupations 
in  the  paper  industry,1  and  the  Bureau  of  Labor  has 
a  study  of  wages  in  the  lumber  and  furniture  indus- 
tries. The  men  employed  in  the  paper  industry  receive 
rates  of  less  than  $750  in  four-fifths  of  the  instances, 
and  of  less  than  $1,000  in  nineteen-twentieths  of  the 
instances.  The  wage  rates  in  the  lumber,  millwork, 
and  furniture  industries  are  approximately  the  same 
as  those  for  pulp  and  paper,  although  lumber  falls 
lower  than  either  of  the  other  two.  Two-fifths  of  the 
men  in  the  lumber  industry  receive  less  than  $500  per 
year;  nine-tenths  receive  less  than  $750.  Millworkers 
receive  less  than  $750  in  three-fifths  of  the  cases,  and 
less  than  $1,000  in  three-fourths;  while  furniture 
makers  (male)  receive  less  than  $750  in  half  of  the 
cases,  and  less  than  $1,000  in  nine-tenths  of  the  cases. 

The  data  presented  by  the  Department  of  Labor 
for  the  clothing  industry  are  so  meager  as  to  be  almost 

1  "Report  on  Paper  and  News-print  Paper  Industry,"  62d  Con- 
gress, ist  Session,  Senate  Document  31.  Washington,  Government 
Printing  Office,  1911,  p.  HI. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY        95 

unusable.  The  total  number  of  persons  included  in 
the  statement  is  six  thousand  women,  and  seven 
thousand  men.1  Since  there  is  no  certainty  as  to  the 
manner  in  which  the  selection  was  made,  and  since 
there  is  little  or  no  corroborating  evidence,  the  ma- 
terial must  be  passed  over. 

The  study  of  wages  in  the  cigar  industry,  which  the 
Department  presents,  is  somewhat  more  illuminating, 
because  it  is  more  careful  and  detailed.2  Still  the 
number  of  employees  for  whom  evidence  is  submitted 
is  woefully  small.  Among  the  3,615  males,  three- 
tenths  received  a  wage  of  less  than  $750,  and  half  a 
wage  under  $1,000.  Four-fifths  of  the  7,551  females 
received  less  than  $750.  Anyone  who  takes  the  pains 
to  examine  these  figures  cannot  help  feeling  that  they 
do  not  adequately  represent  the  cigar  industry. 

An  interesting  analysis  of  the  work  of  women  in  the 
finishing  department  of  the  glass  industry  appeared 
in  connection  with  the  study  of  "Woman  and  Child 
Wage-Earners."  The  study,  which  covered  the  glass 
industry  with  a  degree  of  thoroughness,  shows  2,774 
women  engaged  in  finishing,  for  whom  satisfactory 
data  could  be  secured.  The  chief  interest  in  these 
figures  lies,  not  in  the  wage  scale  which  they  reveal — 
there  is  nothing  unusual  in  that — but  in  the  fact  that 
Mr.  Manly,  in  making  the  study,  procured  for  this 
group  of  women  the  actual  earnings,  as  well  as  the 
wage  rates.  Thus  far,  in  the  course  of  this  chapter, 
wage  rates  have  been  considered  almost  exclusively, 

1  "Wages  and  Hours  of  Labor  in  the  Cigar  and  Clothing  Indus- 
tries," 1911,  and  1912,  United  States  Department  of  Labor,  Bulletin 
135.   Washington,  Government  Printing  Office,  1913,  pp.  25-80. 

2  Ibid,  pp.  5-25. 


96  INCOME 

and  the  yearly  rate  has  been  derived  by  multiplying 
the  weekly  wage  rate  by  fifty-two,  and  the  monthly 
wage  rate  by  twelve.  Under  these  circumstances,  no 
allowance  is  made  for  loss  of  time  due  to  sickness, 
shortage  of  orders,  and  other  causes  of  unemploy- 
ment. The  following  table  for  the  glass  industry  study 
makes  the  contrast  in  excellent  form. 

TABLE  VTII. — EARNINGS  OF  WOMEN  IN  THE  FINISHING  DEPARTMENT 

OF  THE  GLASS  INDUSTRY  1 

Total  Earnings  Per  Year  of  Less  Than 

Employed  $250      $500      $500  and  over 

Fulltime 2,774  38.9      97-4  2.6 

Actual  earnings 2,774  56.5      98.1  1.9 

The  wage  scale  shown  by  this  table  for  the  glass 
industry  would  lead  one  to  conclude  that  two-fifths 
of  the  women  were  receiving  less  than  $250  per  year. 
As  a  matter  of  fact,  the  proportion  of  women  whose 
earnings  were  less  than  $250  per  year  was  nearly  three- 
fifths.  Deductions  in  some  form  nearly  always  drag 
a  wage  scale  considerably  below  its  face  value. 

The  wages  actually  paid  in  the  Chicago  slaughter- 
ing and  meat  packing  industry  are  given  in  a  most 
satisfactory  way  by  J.  C.  Kennedy  in  a  recent  study. 
Mr.  Kennedy  obtained  access  to  the  pay  rolls,  and 
was  thus  able  to  discover  the  wages  actually  paid 
during  a  long  period.  The  figures  are  peculiarly  in- 
teresting, relating,  as  they  do,  to  one  of  the  chief 
centers  in  which  one  of  the  great  industries  in  the 
country  is  carried  on.  It  is,  indeed,  difficult  to  over- 

1  "Woman  and  Child  Wage-Earners  in  the  United  States,"  Charles 
P.  Neill.  Washington,  Government  Printing  Office,  1911,  Vol- 
ume III,  p.  405. 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY        97 

emphasize  their  importance  as  portraying  the  present 
income  situation  in  a  leading  industry. 

TABLE  IX. — WEEKLY  WAGES  ACTUALLY  PAID  IN  CERTAIN  PACKING 

PLANTS  OF  CHICAGO  1 

Per  Cent.  Receiving  Wages  Per 
Total  Year  of  Less  Than 

Employed       $250      $500      $750        $1,000 

Males 7jOQ6  12          39          83  96 

Females 1,064  27          92          99 

A  quarter  of  the  women  and  a  tenth  of  the  men  are 
paid  less  than  a  $250  rate;  two-fifths  of  the  men  and 
nine-tenths  of  the  women  fall  under  $500.  These 
figures  would  be  further  modified  if  they  made  al- 
lowances for  unemployment  throughout  the  year. 
As  they  stand  they  are  the  result  of  a  simple  process 
of  multiplication. 

There  is  every  difficulty  in  the  way  of  generalizing 
from  these  scattered  instances.2  On  the  face  of  the 

1  "Wages  and  Family  Budgets  in  the  Chicago  Stock  Yards  Dis- 
trict," J.  C.  Kennedy.    Chicago,  University  of  Chicago  Press,  1914, 
p.  12. 

2  A  number  of  additional  figures  may  be  found  in  the  following 
reports: — "Wages  of  Women  in  the  Laundries  in  Massachusetts," 
Bulletin  No.  5;  "Wages  of  Women  in  the  Brush  Factories  in  Massa- 
chusetts," Bulletin  No.  i;  "Wages  of  Women  in  the  Corset  Factories 
in  Massachusetts,"  Bulletin  No.  2;  "Wages  of  Women  in  the  Candy 
Factories  in  Massachusetts,"  Bulletin  No.  4;  "Minimum  Wage  Com- 
mission of  Massachusetts,"  Boston,  1914.    "  Wage- Earning  Women 
of  Kansas  City,"  op.  cit.,  pp.  62-72;  "Report  of  the  Conditions  of 
Wage-Earning  Women  in  Connecticut,"  op.  cit.,  pp.  355.;  "Hours 
and  Earnings  of  Women  in  Indiana  Mercantile  Establishments," 
op.  cit.,  pp.  s8ff.;  "Annual  Report  of  the  Bureau  of  Labor  Statistics 
of  Ohio,"  1911.     Springfield,  pp.  2iff.;  "Third  Report  of  the  New 
York  Factory  Commission,"  1914.    Albany,  1914,  pp.  31-41. 


98  INCOME 

return,  the  wages  for  men  are  much  higher  than  the 
wages  for  women.  Both  appear  distributed  over  the 
wage  scale  in  varying  proportions,  depending  upon 
the  industry.  With  the  exception  of  the  finishing 
departments  of  the  woolen  mills,  the  wages  paid  in 
the  textile  industry  appear  to  be  lower  than  those 
paid  in  any  other  of  these  industries;  the  wage  rates 
fall  in  the  vast  majority  of  instances  for  the  men, 
under  $1,000,  and  for  the  women,  under  $750.  In 
most  industries,  from  a  third  to  a  half  of  the  men  re- 
ceive less  than  $500;  and  usually,  at  least  three- 
quarters  receive  less  than  $750.  Four-fifths  of  the 
women  are  paid  less  than  $500.  Women  working  in 
the  manufacturing  industries  receive,  for  the  most 
part,  wages  varying  from  $250  to  $50x3. 

VII.  Wage  Rates  Paid  in  the  Manufacturing  Industries, 
Reported  by  Certain  States  and  by  the  United  States 
Census 

Much  emphasis  has  been  placed  upon  the  wage 
figures  derived  in  the  course  of  special  wage  investi- 
gations, because  in  most  cases  these  figures  represent 
actual  conditions  at  a  specific  time.  There  remain  the 
general  figures  for  manufacturing  industries  published 
by  certain  States  and  by  the  United  States  Census 
Bureau.  In  neither  case  do  these  figures  materially 
alter  the  conclusions  which  were  derived  as  a  result 
of  the  study  of  special  wage  investigations. 

The  wage  facts  secured  by  many  States  are  grossly 
inadequate.1  Nevertheless,  there  is  a  growing  body 
of  usable  information  relative  to  the  wage  scales  paid 

1 "  Wages  in  the  United  States,"  op.  cit.,  Chapters  i  and  2. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY        99 

in  certain  States.  As  regards  the  excellency  of  their 
figures,  New  Jersey  and  Massachusetts  are  well  in 
the  lead.  Several  other  States  are  making  strenuous 
efforts  to  duplicate  or  better  their  good  work. 

The  State  wage  figures  are  usually  given  in  two 
forms.  First,  in  the  form  of  wages  for  the  entire 
State;  and  second,  in  the  form  of  wages  for  certain 
industries.  Several  States  present,  in  addition,  wages 
for  the  larger  cities.  The  figures  for  an  entire  State 
are  meaningless  in  one  sense,  because  of  the  great  di- 
versity of  industries.  In  another  sense,  they  are  pro- 
foundly significant.  The  wage  statistics,  for  example, 
of  Massachusetts,  show  for  six  hundred  thousand  men 
and  women  (out  of  a  total  of  1,531,068  gainfully  em- 
ployed persons  in  1910)  what  the  wage  scale  is  in  the 
manufacturing  industries.  There  could  be  no  more  ef- 
fective metrical  test  applied  to  the  community,  unless 
the  actual  family  incomes  were  measured.  The  wage 
scale  for  the  manufacturing  industries  of  a  manufac- 
turing State  shows  at  least  roughly  the  economic  back- 
ground of  the  people  living  in  the  State.  For  both  New 
Jersey  and  Massachusetts,  two  of  the  six  leading  manu- 
facturing States,  there  are  extant  sufficient  wage  figures 
to  paint  the  economic  background  of  the  great  body 
of  the  industrial  population  in  these  States. 

The  detailed  evidence  already  cited  for  special  in- 
dustries and  special  studies  furnishes  a  background  for 
a  summary  of  wage  facts  for  the  manufacturing  in- 
dustries. The  statements  for  State  and  Census  wage 
facts  could  be  made  equally  detailed.  In  order  to 
avoid  such  duplication,  a  general  summary  of  the 
most  important  State  and  national  data  has  been 
placed  in  one  table. 


100  INCOME 

TABLE  X. — CUMULATIVE  PERCENTAGES  OF  ADULT  MALES  EARNING 

SPECIFIED   WAGE   RATES 

Percentages  of  Adult  Males  Re- 
ceiving Wage  Rates  per  Year  of 

Less  Less  Less 

Than  Than  Than 

Total      $500  $750  $1,000 

Adult      Per  Per  Per 

Industry             Year       Males      Cent.  Cent.  Cent. 

California J 1911           107,950       7                30  63 

Iowa1 1912-13       48,710     12                61  87 

Kansas1 1909             50,720     26                 70  91 

Massachusetts1..  1912           420,524     28                67  90 

New  Jersey1 1911           243,753     36                 71  89 

Oklahoma1 1911             17,007     17                68  90 

Wisconsin1 1909           141,218     32                77  94 

Census2 1905        2,124,069     47                 79  94 

U.  S. — Iron    and 

Steel8 1910           172,706       8                60  85 

U.S. — Textiles4.   1910-12                     60                90  95 

An  examination  of  the  figures  for  various  States, 
and  for  all  of  the  leading  industries  of  the  country, 
corroborates  the  conclusions  already  made  from  the 
special  reports.  The  wage  rates  are  such  that,  making 
no  allowance  for  unemployment,  about  one-tenth  of 
the  males  receive  more  than  $1,000  per  year,  and 
about  one-eighth  of  the  females  more  than  $500  per 

1  Compiled  from  the  Reports  of  the  State  Bureau  of  Labor. 

2  Census  of  Manufactures,  1905,  Bulletin  93,  "Earnings  of  Wage- 
earners."    Washington,  1908,  p.  n. 

3  "  Report  on  the  Condition  of  Employment  in  the  Iron  and  Steel 
Industry,"  Senate  Document  no,  62d  Congress,  ist  Session,  Vol.  I, 
p.  xxvi. 

4  Compiled  from  the  "Reports  of  the  Tariff  Board,"  from  the 
"Report  by  the  Federal  Department  of  Labor  on  the  Strike  at  Law- 
rence," 1912,  and  from  the  State  reports. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY      IOI 

year.  At  the  same  time,  from  a  quarter  to  a  third  of 
the  males  receive  less  than  $500  per  year,  and  from  a 
tenth  to  a  fifth  of  the  females  receive  less  than  $250 
per  year.  Thus  the  great  bulk  of  the  males  are  paid 
wage  rates  varying  from  $500  to  $1,000,  while  the 
great  bulk  of  the  females  are  paid  wage  rates  of  from 
$250  to  $500.  To  this  general  statement,  Oklahoma 
and  California  are  exceptions.  The  wage  rates  there 
are  somewhat  higher  than  in  the  East. 

VIII.  The  Incomes  of  Wage-Earners  Engaged  by  Public 
Utilities 

Recent  studies  have  made  available  a  few  figures 
which  show  the  scale  of  wages  paid  by  public  utilities. 
These  wages  are  higher  than  the  wages  for  industry 
in  general,  but  they  are  not  materially  higher  than 
the  wages  paid  in  the  other  man-employing  industries. 

Three  States  (New  York,  Oklahoma,  and  Kansas) 
publish  wage  rates  for  public  utilities.  The  New  York 
figures  are  for  the  First  District.  There  were  in  1911 
38,139  employees  on  the  street  railways  of  the  First 
District.  Of  this  number  the  wages  of  9,635  men  em- 
ployed by  "selected"  companies  are  tabulated.  Of 
the  total,  5  per  cent,  received  less  than  $500  per  year; 
two-fifths  received  less  than  $750;  and  nine-tenths 
received  less  than  SijOoo.1  The  gas  and  electric  com- 
panies in  this  same  district  report  the  employment  of 
16,741  men,  for  whom  the  range  of  wages  is  consider- 
ably higher  than  the  range  for  street  railway  em- 
ployees. Eight  per  cent,  were  receiving  wage  rates 

1  "Annual  Report  of  the  Public  Service  Commission  of  New  York," 
First  District,  1911,  Volume  II,  pp.  334-339. 


102  INCOME 

under  $500,  45  per  cent,  under  $750,  three-quarters 
under  $1,000,  and  nine-tenths  under  fi^o.1 

The  figures  for  the  two  Western  States  differ  little 
from  those  for  New  York.  The  Oklahoma  report, 
covering  1,129  adult  males  engaged  in  public  utilities, 
gives  the  wage  rates  for  two- thirds  as  under  $750, 
and  nine-tenths  as  under  $i,ooo.2  In  Kansas,  of  the 
702  adult  males  reported  as  employed,  three-quarters 
received  less  than  $750,  and  95  per  cent,  less  than 
$i,ooo.3 

The  compensation  rates  of  persons  employed  in 
public  utilities  are  fairly  uniform.  These  occupations 
apparently  range  among  the  better-paid  occupations 
of  the  country. 

IX.  The  Wage  Rates  for  Mines  and  Quarries 

The  volume  of  the  Thirteenth  Census  devoted  to 
mines  and  quarries  omitted  any  statement  of  classified 
wages.  The  only  general  data  on  the  subject  appear 
in  the  special  Census  report  on  mines  and  quarries 
issued  in  I9O2.4  The  data  contained  in  this  volume 
are  now  so  thoroughly  out  of  date  that  only  a  brief 
reference  to  them  will  be  made. 

There  were  in  1902  581,728  wage-earners  engaged  in 
the  production  of  all  forms  of  minerals.  The  wage 
rates  per  day  of  these  men  are  given  by  industries, 
by  occupations,  and  by  geographical  divisions. 

1  "Annual  Report  of   the  Public  Service  Commission  of  New 
York,"  First  District,  1911,  Volume  III,  p.  280. 

2  "Annual  Report  of  the  Department  of  Labor,"  Oklahoma,  1911- 
12,  p.  209. 

*  "Annual  Report,  Kansas  Bureau  of  Labor,"  1909.  Topeka,  1910, 
p.  21. 
4  Washington,  Government  Printing  Office,  1905,  pp.  90-101. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY      103 

The  tables  showing  the  classified  earnings  of  all 
wage-earners  in  the  mining  industry  report  16  per 
cent,  of  the  men  as  receiving  less  than  $1.74  per  day 
($500  a  year);  62  per  cent,  received  less  than  $2.49 
per  day  ($750  per  year);  and  93  per  cent,  received 
less  than  $3.49  per  day  ($1,050  per  year).  This  show- 
ing, on  its  face,  makes  the  wage  scale  in  the  mining 
industry  correspond  rather  closely  with  that  in  the 
manufacturing  and  mercantile  industries. 

One  further  fact  of  the  greatest  significance  must 
be  borne  in  mind, — the  ratio  of  unemployment  in 
the  mining  industry,  particularly  in  the  coal  mining 
industry,  is  comparatively  high.1  The  Federal  report 
on  the  production  of  coal  in  1910  2  shows  an  average 
number  of  days  worked  in  the  bituminous  coal  mines 
of  217  out  of  a  possible  306  days,  and  in  the  anthracite 
coal  mines  of  229  out  of  a  possible  306  days.  Under 
the  circumstances  it  is  not  fair  to  make  a  direct  com- 
parison between  the  wage  rates  in  manufacturing  and 
in  mining,  derived  by  multiplying  the  day  rate  by 
306.  The  proportion  of  unemployment,  particularly 
in  the  coal  mining  industries,  is  very  much  higher. 

Almost  one-half  of  the  total  number  of  persons 
employed  in  mining  in  1902  were  in  the  bituminous 
coal  mines.  Of  the  bituminous  coal  miners,  280,638, 
only  9  per  cent,  were  paid  less  than  $1.75  per  day; 
20  per  cent,  were  paid  less  than  $2.00  per  day;  58 
per  cent,  were  paid  less  than  $2.50  per  day;  and  95 

1  "Unemployment  in  the  United  States,"  Scott  Nearing,  Quarterly 
Publications  of  American  Statistical  Association,  Volume  II,  Sep- 
tember, 1909,  p.  534. 

2  "Mineral  Resources  of  the  United  States."   Washington,  Govern- 
ment Printing  Office,  1911,  p.  41. 


104  INCOME 

per  cent,  were  paid  less  than  $3.50  per  day.  The 
rates  of  pay  for  anthracite  coal  mining  (employing 
69,691  men)  were  very  much  lower  than  the  rates  for 
bituminous  coal  mining.  Thirty-one  per  cent,  of  the 
anthracite  coal  miners  received  less  than  $1.75  per 
day;  46  per  cent,  received  less  than  $2.00  per  day;  74 
per  cent,  received  less  than  $2.50  per  day;  and  95  per 
cent,  received  less  than  $3.50  per  day. 

The  production  of  iron  ore  involved  the  employ- 
ment of  38,851  men.  These  were  paid  less  than  $1.75 
in  22  per  cent,  of  the  cases,  less  than  $2.00  in  37  per 
cent,  of  the  cases,  less  than  $2.50  in  78  per  cent,  of  the 
cases,  and  less  than  $3.50  in  99  per  cent,  of  the  cases. 

Among  the  36,142  wage-earners  engaged  in  gold  and 
silver  mining,  2  per  cent,  were  paid  less  than  $1.75; 
8  per  cent,  were  paid  less  than  $2.50;  and  67  per  cent, 
were  paid  less  than  $3.50. 

There  is  thus  a  marked  variation  in  the  wage  rates 
paid  for  mining  in  the  different  mining  industries. 
The  fairest  comparison,  if  a  comparison  between 
wages  in  manufacturing  and  wages  in  mining  indus- 
tries is  to  be  made,  must  recognize  the  geographical 
wage  variations.  Most  of  the  wages  from  manufac- 
turing industries  relate  to  the  North  Atlantic  and  the 
North  Central  States.  An  examination  of  the  figures 
for  mining  shows  that  the  wage  rates  paid  in  these 
States  are  considerably  lower  than  the  wage  rates  in 
the  Western  States,  where  smelting  and  refining  are 
the  chief  mining  industries.  Two-fifths  of  the  wage- 
earners  employed  in  mines  and  quarries  in  the  United 
States  were  in  the  North  Atlantic  States;  a  third  were 
in  the  North  Central  States;  and  only  an  eighth  were 
in  the  Western  States.  The  great  bulk  of  the  mining 


SERVICE   INCOME   IN   ORGANIZED   INDUSTRY      10$ 

work  is  therefore  carried  on  in  the  North  Central 
States.  The  wages  in  the  North  Atlantic  Division 
which  relate  to  coal  mining,  chiefly,  are  somewhat 
lower  than  the  wages  reported  for  the  North  Central 
States. 

Although  these  figures  for  mines  and  quarries  are 
so  far  out  of  date  that  no  well-marked  conclusions 
may  be  based  on  them,  they  indicate  that  in  the 
mining  industry  wage  rates  are  similar  to  the  rates  in 
the  manufacturing  industries  in  like  geographical 
sections. 

X.  Service  Incomes  in  Organized  Industry 

The  figures  cited  in  this  chapter  are  far  from  con- 
clusive. They  are,  in  many  cases,  woefully  incom- 
plete. They  cover  only  a  part  of  the  industries  in 
which  men  and  women  are  gainfully  employed.  In 
the  face  of  these  disadvantages,  the  most  surprising 
thing  about  the  figures  is  their  uniformity.  Collected 
by  different  organizations,  and  under  essentially  varied 
conditions,  the  product  of  general  State  and  Federal 
inquiry  and  of  specific  individual  wage  investigations, 
the  figures  agree  marvelously.  Wages  in  the  West  are 
generally  higher  than  wages  in  the  East.1  Throughout 
the  country  lying  east  of  the  Rocky  Mountains,  and 
in  the  industrial  sections  lying  north  of  the  Mason 
and  Dixon  line,  the  facts  appear  to  be  unquestionable 
and  unquestioned.  Subsequent  investigation  will 
reveal  minor  variations,  but  the  large  wage  facts  will 
still  stand  as  they  do  in  these  summaries. 

A  comparatively  small  percentage  of  the  persons 

1  "Wages  in  the  United  States,"  op.  cii.,  Chapter  8. 


106  INCOME 

gainfully  employed  in  modern  organized  industry  are 
on  a  salary  basis.  Of  those  so  classified,  the  great 
proportion  are  foremen,  assistant  superintendents  and 
managers,  and  clerks,  whose  salaries,  for  the  most 
part,  differ  little  from  the  salaries  of  the  better-paid 
wage-earners.  A  small  proportion  of  them  are  paid 
more  than  $1,000  per  year,  and  a  vanishing  number 
receive  more  than  $1,500.  The  vast  majority  of 
those  gainfully  employed  in  organized  industry, 
probably  95  per  cent.,  are  paid  a  wage  or  its  equivalent. 

The  conclusions  from  these  figures  are  inevitable. 
The  great  majority  (almost  nine-tenths)  of  the  adult 
males  receive  wage  rates  of  $1,000  per  year,  or  less. 
An  equal  proportion  of  females  receive  less  than  $750. 
The  wage  rates  of  four-fifths  of  the  males  fall  below 
$750;  a  third  below  $500.  Among  female  wage- 
earners  the  scale  is  much  lower.  Three-quarters  or 
four-fifths  are  paid  less  than  $500  per  year.  These 
statements  make  no  allowance  for  unemployment, 
which  is  a  constant  irreducible  factor.  Unemploy- 
ment due  to  lack  of  work  alone  is  generally  met  with.1 
Add  to  this  the  unemployment  produced  by  sickness, 
accidents,  and  other  personal  causes,  and  the  propor- 
tion is  still  higher. 

The  wage  facts  for  organized  industry  make  one 
thing  impossible.  Hereafter  no  one  need  discourse  at 
length  on  the  theme  of  the  spendthrift  laborer  and 

1  An  idea  of  the  extent  of  unemployment  may  be  gained  from  the 
reports  of  the  New  Jersey  and  the  Massachusetts  Labor  Bureaus, 
showing  the  number  of  days  worked  in  the  various  industries.  See 
Bureau  of  Statistics  of  New  Jersey,  1913.  Paterson,  1914,  pp.  125- 
128.  Also  Statistics  of  Manufactures  for  1911,  Bureau  of  Statistics 
for  Massachusetts,  Public  Document  36.  Boston,  1913,  p.  137. 


SERVICE  INCOME  IN  ORGANIZED  INDUSTRY      107 

the  ensuing  hardship  of  his  family.  The  wage  scale 
of  the  country  is  so  adjusted  at  the  present  time  that 
the  vast  majority  of  the  recipients  of  wages  and 
salaries  are  paid  a  wage  which,  when  compared  with 
the  cost  of  a  decent  or  fair  standard  of  living,  appears 
in  many  instances  insufficient,  and  in  many  others, 
barely  adequate,  to  procure  the  simplest  decencies  of 
life.  The  time  may  come  when  the  laborer's  condition 
is  due  to  his  extravagance  and  lack  of  foresight.  For 
the  present,  the  scale  of  service  income  offers  an  ex- 
planation so  telling  that  it  would  require  hardihood 
of  an  unusual  type  to  saddle  even  a  major  portion  of 
the  blame  for  the  situation  on  the  individual  worker. 


CHAPTER  V 

THE    POSSIBILITIES    OF    PROPERTY    INCOME    IN    THE 
UNITED   STATES 

I.  The  Impersonal  Nature  of  Property  Income  Data 

UNLIKE  service  income,  which  may  be  computed 
readily  for  individual  earners,  property  income  must 
be  reckoned  in  a  wholly  impersonal  way.  Service 
income  is  a  return  for  services;  property  income  is  a 
return  for  property  ownership.  Services  may  be 
measured  in  terms  of  time  or  of  amount  of  product. 
A  man  works  ten  hours,  or  he  weaves  ten  yards  of 
cloth.  The  service  is  apparent,  and  the  resulting 
income  may  be  computed.  Property  income  is  a 
return  for  property  ownership.  A  man  holds  title 
to  a  piece  of  land;  he  has  a  mortgage;  he  holds  a  stock 
certificate — these  evidences  of  property  ownership 
bring  in  a  specified  amount  of  property  income.  He 
may  have  more  or  less  of  these  property  titles  without 
modifying  his  activities  or  increasing  his  contribution 
to  society. 

Property  income  would  be  measurable  in  terms  of 
individual  holdings  if  there  was  any  method  of  de- 
termining the  exact  amount  of  income-yielding  prop- 
erty in  the  possession  of  the  different  persons  in  the 
community.  For  the  time  being,  at  least,  such  a  pos- 
sibility is  indeed  remote.  Even  the  income  tax  returns 
will  afford  little  idea  of  the  amounts  of  property  in- 
come received  by  the  great  bulk  of  people. 

108 


PROPERTY  INCOME  IN  THE  UNITED  STATES   109 

Another  complication  in  the  determination  of  the 
exact  amount  of  property  income  that  is  paid  to  in- 
dividuals arises  from  the  fact  that  the  same  individual 
may  have  a  dozen,  or  a  score  of  sources  from  which 
property  income  is  secured.  Few  men  of  property 
put  all  of  their  eggs  in  one  basket.  Instead,  they 
scatter  their  investments  judiciously.  The  pay  rolls 
of  the  establishment  for  which  a  man  works  will,  in 
the  great  majority  of  cases,  reveal  the  entire  amount 
of  his  service  income.  Property  income  can  be  ar- 
rived at  through  no  such  simple  device. 

However  desirable  may  be  the  accurate  determina- 
tion of  the  amounts  of  property  income  paid  to  in- 
dividuals, such  facts  are  not  essential  to  the  present 
discussion.  The  real  question  at  issue  here  is — "What 
amount  and  what  proportion  of  the  values  created  in 
the  productive  processes  are  paid  to  property  owners?  " 
The  truly  significant  issues  raised  by  a  discussion  of 
property  income  are  in  no  sense  personal.  Those  who 
are  giving  their  time  and  energy  to  the  productive 
work  of  the  community  require  a  return  sufficient  to 
maintain  their  efficiency.  The  receipt  of  property 
income  presupposes  no  such  relation.  Property  in- 
come is  a  payment  by  industry  to  those  whose  titles 
to  property  give  them  a  legal  claim  to  such  payments. 
How  great  is  this  payment?  Is  it  growing  or  decreas- 
ing in  amount?  The  question  as  to  what  individuals 
receive  property  income,  or  whether  it  goes  to  a 
tenth  or  a  twelfth  of  the  citizens  is  immaterial.  So 
long  as  property  income  is  paid,  it  stands,  to  its  full 
amount,  as  a  tax  on  industry  and  on  society. 

Incidentally  it  should  be  remembered  that,  in  in- 
dustrial communities,  the  great  mass  of  men  and 


110  INCOME 

women  depend  upon  service  income  almost  exclu- 
sively, while  a  comparatively  small  part  of  the  popu- 
lation relies  upon  property  income  for  its  maintenance. 
Many  wage-earners  have  small  properties,  invest- 
ments, savings  or  insurance  policies.  The  return  from 
such  sources  constitutes  a  comparatively  small  portion 
of  their  total  income.  A  part  of  the  population  of 
industrial  communities,  perhaps  a  fifth,  perhaps  a 
tenth — have  property  which  yields  a  considerable 
proportion  of  the  total  individual  or  family  income. 
There  is  no  way  of  determining  how  large  this  group 
of  recipients  of  property  income  really  is.  All  in- 
dications point  to  the  conclusion  that  it  comprises 
only  a  small  fraction  of  the  population. 

//.  New  Light  on  Property  Income 

A  quarter  of  a  century  ago,  any  discussion  of  prop- 
erty income,  except  for  income  on  lands,  would  have 
been  impracticable.  The  intangible,  unmeasurable 
form  in  which  wealth  existed  made  any  computation 
of  the  returns  derived  from  it,  next  to  impossible. 

Fortunately  for  the  student  of  income,  modern 
business  developments  have  aimed  to  make  income 
certain,  definite,  and  measurable.  The  results  are 
unquestionably  advantageous  to  the  investor.  They 
are  no  less  desirable  from  the  standpoint  of  the  in- 
vestigator. 

Under  the  old  regime,  a  man  with  energy  and  ini- 
tiative built  up  a  business.  He  began  with  little,  or 
nothing,  and  through  a  series  of  years  acquired  both 
business  experience  and  wealth.  This  man  knew  his 
own  business.  He  was  organizer  and  director,  and  the 


PROPERTY  INCOME  IN  THE  UNITED  STATES        III 

success  or  the  failure  of  the  enterprise  depended  largely 
upon  his  personality.  There  were  few  elaborate  sys- 
tems of  bookkeeping.  Cost-keeping  was  generally 
unknown.  The  business  organizer  was  cook,  captain, 
mate,  and  crew. 

777.  Stabilizing  Business 

The  intensely  personal  nature  of  the  one-man  busi- 
ness led  to  constant  upsets  and  disturbances.  The 
business  director  might  suffer  a  breakdown  in  health, 
physical  or  mental.  When  his  time  for  retirement 
came,  unless  he  succeeded  in  finding  a  worthy  suc- 
cessor, his  business  was  very  apt  to  die  with  him. 

The  timidity  of  the  investor  lies  at  the  basis  of  de- 
mand for  increasing  business  stability.  The  pioneer 
investor  in  any  field  rushes  into  get-rich-quick  schemes 
with  the  gusto  and  enthusiasm  peculiar  to  those  who 
cross  thresholds  upon  which  angels  fear  to  tread. 
This  type  of  pioneer  investor  soon  gives  place,  how- 
ever, to  the  careful,  methodical,  conservative  man, 
who  has  funds,  and  who  is  trying  to  secure  a  compe- 
tence against  his  old  age;  who  has  dependents  expect- 
ing him  to  guarantee  their  economic  future;  or  who  has 
been  made  trustee  of  funds  or  property  which  he 
must  guard  at  the  peril  of  his  good  name.  Then, 
too,  there  are  many  small  investors  with  a  few  hun- 
dred or  a  few  thousand  dollars,  who  are  looking  for  a 
safe  place  to  put  their  surplus.  With  the  upgrowth  of 
civilization  and  the  increase  in  wealth,  goes  an  in- 
sistent demand  for  investment  stability. 

The  need  of  stability  proved  father  to  the  inven- 
tion. A  means  was  eventually  devised  and  perfected 


112  INCOME 

whereby  vested  incomes  could  be  stabilized  and 
guaranteed  to  an  extent  heretofore  undreamed  of. 
This  means  was  the  corporation. 

The  corporation  was  peculiarly  fitted  to  supply  the 
industrial  demand  because  of  three  characteristics. 
In  the  first  place,  it  was  immortal.  Unlike  the  in- 
dividual, it  could  not  die  unexpectedly  and  disturb 
the  business  world.  In  the  second  place,  the  liabilities 
of  investors  in  corporations  were  limited  to  the  amount 
of  the  investment.  No  such  limitation  had  been  pos- 
sible under  the  partnership  laws  which  made  each 
partner  individually  liable  for  all  of  the  business  debts 
of  all  of  his  partners.  In  the  third  place,  by  issuing  se- 
curities the  corporation  could  divide  up  its  total  in- 
vestment capital  into  amounts  that  enabled  the  small 
investor  to  participate  in  the  profits  of  a  large  business. 
These  advantages  made  the  corporation  an  ideal  form 
of  business  organization  from  the  standpoint  of  the 
business  world,  as  well  as  from  the  standpoint  of  the 
investor. 

Another  feature  of  corporate  organization  rendered 
it  desirable  as  a  means  of  directing  business  enterprise. 
The  affairs  of  the  corporation  were  in  the  hands  of  a 
board  of  directors  rather  than  in  the  hands  of  an  in- 
dividual business  manager.  The  books  of  the  cor- 
poration were  elaborately,  if  sometimes  mendaciously 
kept.  The  industry  in  question  was  always  subject 
to  the  dictation  of  the  board  of  directors,  although 
the  directors  did  not  always  exercise  their  directive 
power.  Still  they  were  legally  subject  to  the  will  of 
the  stockholders,  so  that  even  the  small  holder  of 
securities  had  a  theoretical  say  in  the  conduct  of  the 
business.  The  corporation  was  therefore,  in  a  sense, 


PROPERTY  INCOME  IN  THE  UNITED  STATES        113 

democratic.  A  multitude  of  counselors  was  sub- 
stituted for  one  man's  judgment,  and  that  section  of 
the  public  which  had  investable  funds  was  enabled 
to  participate  in  business  enterprise. 

The  old-time  private  business — shirt  sleeves  to  shirt 
sleeves — could  be  disintegrated  by  the  stupidity  or  ras- 
cality of  the  organizer;  the  new  corporate  business  un- 
der the  control  of  a  board  of  directors  can  be  taken  into 
court  by  a  minority  stockholder,  and  forced  to  make 
an  accounting.  This  potential  publicity  of  business  ac- 
counts was  the  chief  guarantee  to  business  stability. 

The  old-time  business,  even  in  those  cases  where 
careful  books  were  kept,  was  comparatively  uncer- 
tain and  indefinite.  The  corporation  business  is  cer- 
tain, definite,  and  measurable  to  a  far  greater  degree. 
This  definiteness  is  the  result  of  security  issues,  and 
of  modern  systems  of  accounting. 

IV.  Corporation  Accounting — -An  Open  Sesame  to 
Business  Facts 

The  issuing  of  corporate  securities  provided  the  first 
accurate  measure  of  the  volume  of  invested  funds, 
and  of  the  returns  received  for  investment.  There 
are  evidences  that  the  English  cotton  mill  owners  of 
the  early  nineteenth  century  made  in  some  cases  100, 
200,  or  even  300  per  cent,  profits.  Such  feats  are 
credited  to  Robert  Owen  and  other  successful  man- 
agers. The  amount  of  profits  made  by  an  incorporate 
concern  at  the  present  time  is  publicly  ascertainable 
to  a  degree  of  definiteness  undreamed  of  by  early 
nineteenth-century  enterprise. 

Capitalization  in  terms  of  stocks  and  bonds  affords 
a  practical  measure  of  the  amount  of  wealth  invested 


1 14  INCOME 

in  a  business.  This  limit,  to  be  sure,  is  not  absolute. 
Many  stocks  have  been  watered.  On  the  other 
hand,  businesses  are  frequently  capitalized  for  a  less 
amount  than  the  value  of  business  assets.  Neverthe- 
less, in  the  great  majority  of  cases,  the  amount  of 
capitalization  bears  a  fairly  definite  relation  to  the 
amount  of  property  owned  by  the  business;  and  this 
capitalization,  coupled  with  the  rate  of  return  on 
stocks  and  bonds,  tells  a  measurably  intelligible  story 
of  the  worth  of  a  given  enterprise. 

Under  the  old  system  of  business  no  returns  were 
definitely  established  unless  a  business  man  had  rented 
land  or  borrowed  money.  In  those  cases,  his  rent  and 
interest  were  fixed  quantities.  The  issuing  of  bonds 
fixes  the  amount  of  property  income  which  the  busi- 
ness issuing  the  bonds  must  always  pay. 

The  old-time  business,  in  a  period  of  depression, 
paid  no  returns  to  the  man  who  had  invested  his  for- 
tune and  his  life  in  its  upbuilding.  The  modern  busi- 
ness with  a  million-dollar  bond  issue  pays  $50,000 
each  year  to  the  bondholders,  irrespective  of  the  con- 
ditions of  business.  Whether  the  world  of  affairs  be 
rejoicing  at  prosperity  or  suffering  in  the  throes  of 
business  adversity,  the  interest  charge  must  be  met, 
because  the  moment  this  payment  of  interest  ceases 
the  business  goes  into  bankruptcy.  Stocks,  as  a  rule, 
do  not  furnish  so  definite  a  measure  of  value  as  bonds. 
However,  when  dividends  are  paid  on  stocks,  a  fairly 
good  idea  of  the  values  behind  the  business  may  be 
secured. 

Bonds  are  now  a  measurable  basis  for  computing 
property  values  in  business.  Each  passing  year 
places  stocks  more  nearly  in  the  same  category.  The 


PROPERTY  INCOME  IN  THE  UNITED  STATES         11$ 

issuing  of  securities  has  probably  done  more  than 
any  other  single  act  to  tell  the  world  at  large  about 
business  capitalization.  When  security  issues  came 
in  at  the  door  of  business,  dark  hued  secrecy  flew 
out  at  the  window  never  to  return. 

The  corporate  form  of  business  possesses  another 
supreme  advantage  from  the  standpoint  of  the  in- 
vestigator of  income.  Under  it  all  wages  and  salaries 
are  fixed.  The  individual  business-man  or  firm  mem- 
ber took  what  he  could  get  out  of  the  business  as  his 
share  of  the  profits.  The  president  of  a  corporation 
receives  a  salary  which  is  as  definitely  fixed  as  the 
salary  of  the  humblest  employee  in  the  concern.  Thus 
the  incorporation  of  business  has  resulted  in  establish- 
ing the  amounts  of  property  values  in  business,  and  in 
giving  an  accurate  measure  of  the  service  incomes 
received  by  all  of  those  who  do  the  work  of  the  busi- 
ness world. 

The  books  of  any  corporation  show  the  exact  amount 
of  service  income  which  is  paid  to  each  individual  who 
is  rendering  services  to  the  corporation,  at  the  same 
time  the  books  show  the  total  amount  of  property 
income  that  the  corporation '  pays  each  year  to  its 
stockholders  and  to  its  bondholders.  Such  informa- 
tion is  in  the  former  case,  personal;  in  the  latter  case, 
general;  but  it  makes  an  absolute  line  of  demarcation 
between  service  income  on  the  one  hand,  and  property 
income  on  the  other. 

V.  A  New  Form  for  Expressing  Wealth 

The  issue  of  corporate  securities  has  one  further 
advantage.  Stocks  and  bonds  are  more  than  a  meas- 
ure of  wealth.  They  are  in  a  certain  sense  a  certifica- 


Il6  INCOME 

tion  of  wealth.  The  Anglo-Saxon  mind  has  been 
trained  to  regard  property  as  a  very  holy  thing.  One 
of  the  most  cherished  clauses  in  the  Constitution 
declares  that  private  property  shall  not  be  taken  for 
public  use  without  fair  compensation.  The  mere 
existence  of  a  bond  or  of  a  stock  certificate  is  regarded 
by  the  property-reverencing  mind  as  a  property 
equivalent. 

The  issue  of  corporate  securities  presents  a  new 
problem  to  the  mind  which  venerates  property  rights. 
It  was  easy  to  see  that  a  piece  of  land,  or  a  house,  or  a 
coat,  or  a  walking-stick  was  property,  and  therefore 
inviolable.  Another  question  is  raised  when  business 
incorporates  itself.  The  private  business  had  no  fixed 
limits.  If  it  made  profits,  they  went  to  the  business 
owner.  If  it  did  not  make  profits,  it  disappeared  from 
the  business  world,  and  a  competitor  took  its  place. 
When  a  cotton  mill  owner  was  forced  to  the  wall, 
he  did  not  go  into  court,  and  demand  that  some- 
one pay  him  a  return  for  the  business  reputation, 
trade-marks,  and  the  business  clientele  which  he  had 
lost  in  the  competitive  melee.  The  private  business 
man  had  invested  his  own  property.  If  he  lost  it,  he 
alone  was  to  blame.  Furthermore,  it  was  taken  for 
granted  that  he  should  be  at  the  mercy  of  competitive 
conditions.  The  property  of  the  corporation  is  ren- 
dered definite  by  the  issuing  of  securities.  The  bond- 
holder takes  his  certificates  of  indebtedness  to  court 
and  makes  certain  demands  upon  the  business  whose 
securities  he  owns.  The  bondholder  feels,  and  the 
public  feels,  that  each  thousand  dollar  bond  stands  for 
a  thousand  dollars  in  wealth  upon  which  the  business 
is  bound  to  pay  a  return. 


PROPERTY  INCOME  IN  THE  UNITED  STATES   117 

Corporate  securities  to  the  public  mind,  certify 
wealth  possession.  A  bond,  surely,  and  a  stock  cer- 
tificate, probably,  represent  a  fixed  quantity  of  wealth. 
The  public  recognizes  this  fact;  the  courts  recognize 
it;  and  the  owner  of  such  a  certificate  regards  himself 
as  the  owner  of  so  much  property.  He  has  never 
seen  the  property;  his  only  assurance  of  its  existence 
lies  in  his  certificate.  Nevertheless,  he  banks  heavily 
on  that  assurance. 

The  general  conversion  of  business  into  corporate 
business  involving  the  issue  of  securities  has  led  in- 
dustrial and  commercial  ventures  to  reveal  the  amount 
of  wealth  invested  in  them,  the  amount  of  returns 
paid  the  owners  of  this  wealth,  and  also  the  entire 
amount  of  service  income  paid  by  the  business. 

It  is  therefore  possible  to  take  the  books  of  any 
corporate  business  and  ascertain  the  total  amount 
paid  for  services  and  the  total  amount  paid  as  prop- 
erty income.  The  advantage  which  the  student  of 
income  derives  from  this  fact  can  scarcely  be  over- 
rated in  an  age  when  the  incorporation  of  business 
is  so  general. 

VI.  The  Movement  toward  Concrete  Property  Valuation 

At  the  present  time,  steam  and  electric  railroads, 
public  utilities,  and  financial  institutions  are  almost 
entirely  on  a  corporate  basis.  The  manufacturing 
industries  of  the  country  report  that  of  the  total 
products  in  1909  (amounting  to  slightly  more  than 
twenty  billion  dollars,  10  per  cent,  were  turned  out 
by  individual  businesses,  1 1  per  cent,  by  partnership 
businesses,  and  79  per  cent,  by  incorporated  busi- 
nesses. 


Il8  INCOME 

Agriculture  is  the  one  great  industry  which  has  not 
yet  adopted  the  corporate  form  of  business  organiza- 
tion. The  traditional  farmer  inherited  or  bought  his 
land,  and  made  what  he  could  on  it.  He  kept  no 
books;  therefore  he  had  no  sense  of  the  valuation 
which  he  was  creating  or  receiving.  During  the  past 
twenty  years  a  very  radical  change  has  occurred. 
The  progressive  farmer  to-day  keeps  books  on  which 
are  written  down  the  investment  values  of  the  land. 
In  many  instances  these  values  are  overwritten. 
Nevertheless,  the  fact  remains  that  the  farmer  who 
has  bought  land,  or  the  farmer  who  is  working  under 
a  mortgage,  is  learning  to  believe  that  he  should  make 
his  business  pay  not  only  a  bare  subsistence,  but  a 
return  on  the  investment  as  well. 

The  avowed  purpose  of  the  Long  Island  Railroad 
and  other  experimental  farms,  is  to  demonstrate  to 
capitalists  that  the  farm,  like  any  other  business, 
can  be  made  to  pay  a  return  on  capital  invested.  In 
a  few  cases,  corporations  own  farms;  in  many  more 
cases  the  individual  farmer  is  learning  to  insist  that 
the  return  which  he  receives  for  his  products  shall 
include  interest  on  a  capital  valuation  which  includes 
the  value  of  his  land  and  improvements. 

The  tendency  of  well-to-do  people  to  rent  their 
farms  and  move  into  town  adds  one  more  item  to  the 
list  of  forces  which  are  building  up  a  proper  valuation 
in  agricultural  land.  Like  all  property  owners  who 
do  not  work  directly  with  their  property,  the  retired 
farmer  expects  a  return  from  his  farm  in  proportion 
to  what  he  believes  the  farm  to  be  worth. 

When  the  time  comes,  and  it  is  coming  very  rapidly, 
that  farmers  keep  accounts,  take  inventories,  and  de- 


PROPERTY  INCOME  IN  THE  UNITED  STATES        1 19 

mand  a  return  proportionate  to  the  amount  of  wealth 
which  their  farms  represent,  the  last  great  item  will 
have  been  added  to  the  measured  wealth  of  the 
country. 

A  long  step  in  the  direction  of  farm  value  measure- 
ment has  already  been  taken.  The  Census  publishes 
an  elaborate  schedule  showing  the  value  of  farm  lands, 
of  farm  buildings,  and  of  farm  machinery.  Although 
these  values  are  probably  over,  rather  than  under, 
the  true  valuations,  they  nevertheless  furnish  a  point 
of  departure  from  which  error  can  be  eliminated,  and 
truth  ascertained. 

VII.  Property  Income  Possibilities 

Although  so  many  steps  have  been  taken  toward 
stability  in  investment  and  regularity  in  the  returns 
on  property,  a  distinction  must  be  made  between 
possible  and  actual  property  incomes.  In  the  first 
place,  all  of  the  property  which  might  be  made  to 
yield  an  income  has  not  yet  been  assessed  and  placed 
upon  the  books.  In  the  second  place,  records  of  the 
income  actually  paid  are  so  incomplete  that  there 
is  no  way  of  showing  accurately  what  the  total 
amount  may  be.  In  this  and  the  succeeding  chapter 
two  questions  are  raised.  First,  the  question  as  to 
how  much  wealth  there  is  now  existing  in  the  United 
States  on  which  property  incomes  might  be  paid; 
second,  the  question  as  to  the  amount  of  property 
income  now  being  paid  for  which  a  statistical  record 
can  be  secured. 

What  is  the  amount  of  property  in  the  United  States 
that  might  pay  or  that  may  pay  property  income? 


I2O  INCOME 

What  property-income  possibilities  exist?  How  much 
property  is  there  in  the  United  States  from  the  owner- 
ship of  which  income  may  be  derived?  How  great  is 
the  potential  property  income  of  the  country?  Put 
the  question  in  any  of  its  many  forms,  the  essential 
elements  in  the  problem  remain  the  same. 

How  simple  the  answer  might  be!  If  it  were  only 
possible  to  tabulate  and  take  the  totals  for  all  of  the 
property  in  the  country  that  may  be  used  to  net  the 
owner  an  income,  and  then  the  totals  of  income  ac- 
tually paid  to  property  owners,  the  matter  would  be 
settled  in  a  twinkling.  There  would  be  no  need  of 
a  discussion  and  there  could  be  no  question  as  to  the 
facts. 

As  the  matter  stands,  the  first  duty  of  the  investiga- 
tor is  to  set  down,  with  the  utmost  accuracy  that  the 
figures  permit,  a  list  of  the  property  holdings  in  the 
United  States  from  which  income  might  be  derived. 
Nor  can  this  be  done  directly  or  authenticated  to 
any  considerable  degree.  The  sources  of  information 
regarding  the  amounts  of  property  income  actually 
paid  in  the  United  States  are  much  less  complete 
than  those  for  the  income  possibilities.  Here  the 
information  must  be  drawn  from  the  most  scattered 
sources. 

The  task  is  indeed  discouraging.  Its  chief  inspira- 
tion is  the  hope  that  the  beginnings  here  made  will 
lead  to  more  elaborate,  publicly  financed  investiga- 
tions, that  will  substantiate  existing  data  and  compile 
additional  information  from  sources  that  are  beyond 
the  reach  of  the  private  investigator. 

In  the  meantime  the  available  data  may  be  passed 
in  review. 


PROPERTY  INCOME  IN  THE  UNITED  STATES         121 

VIII.  Income-Yielding  Property  in  the  United  States 

The  most  comprehensive  survey  of  property  in  the 
United  States  is  presented  in  the  Census  estimates  of 
national  wealth.  The  shortcomings  of  this  material 
have  been  noted  elsewhere;  nor  is  it  the  purpose  of  the 
present  study  to  assume  any  large  degree  of  accuracy 
in  the  results.  On  the  contrary,  they  are  undoubtedly 
subject  to  a  wide  margin  of  error.  At  the  same  time, 
they  are  at  least  suggestive  of  the  total  wealth  values 
of  the  country. 

The  latest  available  Census  figures  on  national 
wealth  were  published  in  1907  and  relate  to  the  year 
1904.  The  director  of  the  Thirteenth  Census  (1910) 
has  published  a  number  of  special  bulletins  on  Public 
Property,  Assessed  Valuation  of  Property,  Debt, 
Revenue  and  Expenditure.  As  yet,  there  is  no  esti- 
mate of  total  wealth,  nor  is  there  any  definite  promise 
of  such  an  estimate.1  The  circumstances  necessitate 
the  use  of  material  that  is  a  decade  behind  the  times. 
There  seems,  however,  to  be  no  alternative. 

The  Census  figures  for  1904  give  the  total  estimated 
value  of  all  property  in  the  United  States  as  $107,104,- 
000,000.  The  distribution  of  this  wealth  appears 
in  the  following  table: 

1  "Up  to  the  present  time,  no  estimates  have  been  made  as  to 
the  total  wealth  of  the  United  States  in  connection  with  the  inves- 
tigation, Wealth,  Debt  and  Taxation,  1913,  although  such  estimates 
were  made  at  the  last  investigation  on  this  subject.  The  question 
as  to  whether  estimates  of  the  wealth  of  the  country  will  be  made 
for  19 1 2,  is  now  under  advisement,  and  it  is  probable  that  such 
statistics  will  be  compiled  and  given  to  the  public,  for  the  United 
States,  by  States."  Letter,  March  6,  1915,  from  the  Director  of  the 
Census. 


122  INCOME 

TABLE  XI. — ESTIMATED  TRUE  VALUE  (IN  MILLIONS)  or  ALL  PROP- 
ERTY AND  OF  SPECIFIED  CLASSES  OF  PROPERTY,  1904  l 

Real  Property  and  Improvements $62,341 

Live  Stock 4,074 

Farm  Implements  and  Machinery 845 

Manufacturing  Machinery,  Tools  and  Implements 3,298 

Gold  and  Silver  Coin  and  Bullion i,999 

Railroads  and  their  Equipment 11,245 

Street  Railways,  Shipping,  Waterworks,  etc 4,841 

All  Others 18,462 

These  figures  give  little  opportunity  for  analysis  in 
terms  of  property  income  possibilities,  because  they 
correspond  so  imperfectly  with  the  other  facts  on 
wealth  and  property.  The  separation  of  farm  land 
and  improvement  values  from  the  implements  and 
machinery  values  has  a  counterpart  in  the  farm 
values  published  in  the  Census  volumes  on  agricul- 
ture. Generally,  however,  capital  values,  including 
land,  improvements,  and  machinery  appear  in  a 
lump  sum.  Such  a  practice  is  made  inevitable  by  the 
growth  of  corporate  business. 

Most  of  the  property  listed  by  the  Census  would  be 
classed  as  potential  income-yielding  property.  Real 
property  and  improvements,  live  stock,  and  farm  im- 
plements and  machinery  may  or  may  not  yield  an 
actual  property  income.  Where  they  are  used  by 
the  owners,  no  such  income  is  paid  directly  in  the 
form  of  purchasing  power. ;  On  the  other  hand,  such 
property  may  be  and  very  frequently  is  rented,  and 
returns  property  income  to  the  owners.  Manufac- 
turing machinery,  and  railroads  and  street  railways 

1  "Wealth,  Debt  and  Taxation,"  Special  Report  of  the  Census. 
Washington,  Government  Printing  Office,  1907,  p.  37. 


PROPERTY  INCOME  IN  THE  UNITED  STATES        123 

are,  for  the  most  part,  yielding  actual  property  in- 
comes as  almost  all  public  service  corporations  and 
the  great  bulk  of  manufacturing  enterprises  are  under 
a  corporate  form  of  business  organization.  The  last 
item  in  the  table  "All  Others"  includes  "products 
of  agriculture,  manufactures  and  mining;  imported 
merchandise;  clothing  and  personal  adornment;  furni- 
ture, carriages  and  kindred  property."  Such  property, 
as  a  rule,  does  not  command  property  income.  If 
this  entire  item  were  excluded  from  the  category  of 
income-yielding  property,  there  would  remain  (1904) 
approximately  ninety  billions  of  property  that  might 
yield  a  property  income  to  its  owners. 

The  Census  figures  cannot  be  brought  any  nearer 
to  date.  If  they  could,  the  total  would,  of  course, 
be  increased  by  many  billions.  Even  in  1904,  the 
annual  property  income  possibilities  were  vast — over 
two  and  a  half  billions,  if  the  property  yielded  3  per 
cent,  and  over  five  billions  if  it  yielded  6  per  cent. 

The  Census  figures  on  national  wealth  may  be  sup- 
plemented by  some  later,  fragmentary  figures,  which, 
though  less  complete,  give  a  far  clearer  idea  of  the 
property  income  possibilities  of  the  United  States 
at  the  present  time.  The  figures  must  be  gathered 
from  various  sources;  there  is  an  unavoidable  duplica- 
tion; nevertheless,  they  are  worthy  of  at  least  some 
consideration. 

The  most  complete  single  statement  of  income 
yielding  property  is  made  by  the  United  States  Com- 
missioner of  Internal  Revenue  in  his  annual  report.1 
This  report  includes  the  financial  and  commercial 

1  "Annual  Report  of  the  Commissioner  of  Internal  Revenue,"  1913. 
Washington,  Government  Printing  Office,  1913,  pp.  91-102. 


124  INCOME 

corporations;  public  service  corporations;  industrial 
and  manufacturing  corporations;  mercantile  cor- 
porations and  miscellaneous  corporations  which  re- 
port to  the  Federal  government  under  the  Corporation 
Tax  Law.1  The  total  capitalization  of  these  corpora- 
tions is  $96,488,ooo,ooo,2  all  of  which  is  in  the  form 
of  potential  income-yielding  property. 

The  figures  published  by  the  Commissioner  of 
Internal  Revenue  cover  that  part  of  the  business  of 
the  country  which  is  transacted  under  the  corporate 
form  of  organization.  There  is,  of  course,  a  large 
amount  of  business  done  by  partnerships  and  by 
private  individuals  which  would  not  come  under  this 
classification.  While  there  is  no  way  to  ascertain 
accurately  the  amount  of  non-corporate  business, 
an  approximation  is  possible. 

An  approximation  of  the  non-corporate  business 
included  under  the  categories  covered  by  the  report 
of  the  Commissioner  of  Internal  Revenue  may  begin 
with  the  assumption,  not  strictly  accurate,  that 
financial  and  commercial  corporations  (banks,  trust 
companies,  surety  companies  and  insurance  com- 
panies), and  public  service  corporations  (railroads, 
steam  boats,  pipe  lines,  gas,  transportation,  storage, 
telegraph  and  telephone)  are  all  incorporated.  The 
Internal  Revenue  figures  in  these  two  classes  of  cor- 
porations would  then  be  the  total  amount  of  potential 
income-yielding  property  in  these  fields.  There  re- 
main the  other  three  classes  of  corporations  cited  by 
the  Commissioner  of  Internal  Revenue.  The  indus- 

1  For  a  detailed  description  of  each  class,  see  page  140. 

2  Capital  Stock,  $61,738,000,000;  Bonded  and  Other  Indebt-dness, 
$34,750,000,000. 


PROPERTY  INCOME  IN  THE  UNITED  STATES   125 

trial  and  manufacturing  corporations  (mining,  lum- 
bering, manufacturing,  refining,  packing  and  canning) 
have  a  total  capitalization  of  $34,903,872,031.  The 
Census  of  Manufactures  (i3th  Census,  Volume  VIII, 
p.  135)  shows  that  approximately  four-fifths  of  the 
manufacturing  business  of  the  United  States  is  carried 
on  by  corporations.  The  Census  Volume  on  Mines 
and  Quarries  (i3th  Census,  Volume  XI,  p.  33),  shows 
that  approximately  nine-tenths  of  the  mining  business 
is  carried  on  by  corporations.  Apparently,  it  would 
be  fair  to  add  a  fifth  to  the  industrial  and  manufac- 
turing corporate  capital  reported  by  the  Commissioner 
as  representing  the  partnership  and  single-man  capital 
invested  in  similar  businesses.  The  last  two  classes 
cited  by  the  Commissioner  of  Internal  Revenue  in- 
clude dealers  in  coal,  lumber,  grain,  and  all  other 
merchandise;  and  architects,  contractors,  hotels, 
theaters,  etc.  The  total  capitalization  of  these  busi- 
nesses is  $17,633,333,157.  Broadly  speaking,  these 
businesses  are  peculiarly  non-corporate  in  their  or- 
ganization. It  may  be  guessed  that  the  seventeen 
billions  of  corporate  capital  constitutes  not  more  than 
a  half  or  two-thirds  of  the  total  capital  invested  in 
mercantile  and  miscellaneous  industries.  If  such  is 
the  case,  another  ten  or  fifteen  billion  of  dollars  could 
be  added  to  the  total  returns  cited  by  the  Commis- 
sioner of  Internal  Revenue  as  representing  the  non- 
corporate business  falling  under  these  last  two  classes. 
The  approximated  additions  to  the  total  figures  for 
corporate  business  capital  cited  by  the  Commissioner 
of  Internal  Revenue  would  equal  from  fifteen  to 
twenty  billions. 
The  estimated  additions  to  the  total  corporate 


126  INCOME 

capitalization  (ninety-six  billions)  as  reported  by  the 
Commissioner  of  Internal  Revenue,  are  extremely 
rough.  They  indicate,  however,  that  the  income- 
yielding  values  employed  in  those  branches  of  American 
business  reported  on  by  the  Commissioner  of  Internal 
Revenue  in  1913  were  in  the  neighborhood  of  no 
or  115  billions.  All  of  these  values  were  expected  to 
pay  property  income  to  the  owners. 

There  are  a  number  of  classes  of  income-yield- 
ing property  not  included  in  the  statement  of  the 
Commissioner  of  Internal  Revenue.  Chief  among 
them,  are  farm  property,  public  indebtedness,  and 
city  real  estate.  The  total  value  of  all  farm  prop- 
erty in  the  United  States,  April  15,  1910,  was  placed 
at  $40,991, ooojooo.1  The  values  were  divided  as 
follows: — land,  $28,476,000,000;  buildings,  $6,325,- 
000,000;  implements  and  machinery,  $1,265,000,000; 
domestic  animals,  poultry  and  bees,  $4,925,000,000. 
These  figures  were  collected  in  the  course  of  the 
regular  Census. 

The  total  net  public  debt  (total  indebtedness  less 
sinking  fund  assets  or  funds  available  for  payment 
of  debt)  in  1913  for  the  Federal  government,  the  State 
governments,  and  all  minor  civil  divisions  including 
cities,  was  $4,85o,46o,7i3.2  These  figures  are  accu- 
rate, and  all  of  the  values  which  they  represent  were 
yielding  property  incomes. 

The  estimates  for  city  real  estate  are  inconclusive 
and  wholly  unsatisfactory.  The  Bureau  of  the  Census 
reports  that  in  1911,  the  assessed  valuation  of  prop- 

1 "  Thirteenth  Census,"  Volume  V,  p.  28. 

1  "Abstract  of  Special  Bulletins  on  Wealth,  Debt  and  Taxation," 
1913.  Washington,  Government  Printing  Office,  1915,  p.  17. 


PROPERTY  INCOME  IN  THE  UNITED  STATES    127 

erty  in  American  cities  having  a  population  of  30,0x30 
or  over  was  $29,382,ooo,ooo.1  Of  this  amount, 
$23,750,000,000  represented  real  property,  and 
$4,091,000,000  personal  property.  In  the  first  place, 
the  assessed  valuation  is  apt  to  be  below  rather  than 
above  real  value.  Furthermore  these  figures  can- 
not possibly  be  used  in  this  connection,  because 
there  is  no  way  of  telling  what  proportion  of  the  as- 
sessed valuation  of  city  property  is  already  repre- 
sented in  the  returns  for  corporations,  published  by 
the  Commissioner  of  Internal  Revenue.  Certainly 
the  corporation  owned  business  property  located  in 
large  cities  is  included.  Again,  these  figures  are  woe- 
fully incomplete  because  there  is  no  method  of  ascer- 
taining the  value  of  real  property  in  cities  and  towns 
having  a  population  of  less  than  30,000.  The  houses 
and  privately  owned  business  properties  in  American 
cities  and  towns  that  may  yield  or  that  actually  are 
yielding  property  income  certainly  amount  to  many 
billions.  The  exact  number,  must,  for  the  present, 
remain  a  matter  of  uncertainty. 

There  are  now  two  methods  of  procedure.  The  pub- 
lished figures  (other  than  the  Census  figures  for  1904 
on  Wealth,  Debt  and  Taxation)  may  be  added  at  their 
face  value.  The  sum  will  be  the  amount  of  potential 
income-yielding  property  actually  reported  and  tabu- 
lated. The  other  method  is  to  include,  in  this  total, 
estimates  covering  privately  conducted  business  and 
privately  owned  city  real  estate.  The  totals  from 
the  latter  method  will  be  greatly  in  excess  of  those 
secured  by  the  former  method. 

1 "  Financial  Statistics  of  Cities,"  1911.  Washington,  Government 
Printing  Office,  1911,  p.  324. 


128  INCOME 

The  face  value  returns  for  income-yielding  prop- 
erty are  equal  to  the  sum  of  96  billions  of  corporate 
business  property,  reported  by  the  Commissioner  of 
Internal  Revenue,  the  41  billions  of  farm  values  and 
the  5  billions  of  public  debt,  reported  by  the  Census 
office.  This  gives  a  total  of  approximately  140  billions 
of  income-yielding  property.  There  is,  in  this  amount, 
no  allowance  for  the  property  invested  in  non- 
corporate business,  or  for  the  real  estate  in  cities 
and  towns,  held  by  firms  or  individuals.  The  state- 
ment is,  therefore,  very  incomplete. 

The  second  method  of  computing  the  total  of  po- 
tential income-yielding  property,  while  less  accurate, 
is  far  more  inclusive.  The  Internal  Revenue  figures 
should  be  increased  by  perhaps  fifteen  or  twenty  bil- 
lions. The  city  and  town  real  estate,  not  owned  by 
firms  or  corporations,  must  equal  tens  of  billions  ad- 
ditional. A  highly  conservative  statement  of  the 
problem  would  place  the  value  of  potential  income- 
yielding  property  in  the  United  States  at  a  sum  very 
considerably  in  excess  of  170  billions. 

The  figures  stagger  the  imagination.  They  are  un- 
thinkably  vast,  yet  they  represent,  though  only 
roughly,  the  facts  of  possible  income-yielding  property 
values  in  the  United  States. 

The  possibilities  of  property  income  from  the  total 
income-yielding  property  may  be  suggested.  If  the 
potential  income-yielding  property  of  the  country 
(estimated  as  "  considerably  in  excess  of  170  billions") 
paid  a  return  at  the  rate  of  three  per  cent,  on  its  stated 
value,  the  total  amount  of  property  income  would  be 
considerably  more  than  five  billions  of  dollars.  If  it 
paid  a  return  of  six  per  cent.,  the  total  amount  of 


PROPERTY  INCOME  IN  THE  UNITED  STATES   1 29 

property  income  would  be  considerably  more  than 
ten  billions  of  dollars.  These  are  the  sums  that  might 
be  paid  annually  to  the  owners  of  property  in  the 
United  States. 

The  totals  for  possible  property  income  may  be 
compared  with  some  service  income  totals.  The 
wages  and  salaries  paid  by  the  manufacturing  indus- 
tries of  the  United  States  in  1909  were  $4,365,612,851 ; 
the  wages  and  salaries  paid  by  the  railroads  in  1912 
were  $1,252,347,697;  the  wages  and  salaries  paid  by 
all  of  the  mines  and  quarries  in  1909  were  $640,167,630. 
Together  these  figures  total  only  six  and  a  half  billions. 

These  estimates  of  total  property  income-yielding 
values  will,  of  course,  be  called  into  question.  The 
methods  of  approximation  are  of  necessity,  rough, 
and  inaccurate;  the  possibility  of  duplicating  the 
same  values,  under  two  or  more  classifications  are 
considerable;  many  of  the  figures  are  themselves 
open  to  serious  question,  since  they  may  represent 
watered,  and  not  real  values.  It  is  for  these  reasons 
that  the  total  was  placed  at  a  figure  "considerably  in 
excess  of  170  billions."  The  results  have  been  stated 
in  such  general  terms  because  of  the  general  nature 
of  the  figures  on  which  they  are  based.  No  one  could 
regret  more  keenly  than  the  writer,  the  necessity  for 
these  generalizations.  At  the  same  time,  no  one  can 
deny  the  immensity  of  the  problem.  Deduct  a  few 
billions  or  even  a  few  tens  of  billions  from  the  sum 
total,  and  the  amount  of  potential  income-yielding 
property  in  the  United  States,  is  still  incomprehen- 
sively  vast.  Take  the  Internal  Revenue  figures  for 
corporate  business,  and  prune  them  to  the  stalk, 
reduce  the  totals  for  non-corporate  business,  for  farm 


130 


INCOME 


values  and  for  urban  real  estate  by  as  much  as  you 
will.  After  even  the  most  conservative  scaling  down, 
there  remains  a  huge  sum  of  American  property  values 
that  may  yield  an  income  to  the  holders  of  property 
titles. 


CHAPTER  VI 

PROPERTY  INCOME  ACTUALLY  PAID  IN  THE  UNITED 
STATES 

/.  Property  on  Which  Income  is  Paid 

THE  facts  regarding  the  total  amount  of  income- 
yielding  property  in  the  United  States  are  important, 
yet  the  real  interest  for  the  present  study  must 
center  in  the  actual  payment  of  income,  rather  than 
in  the  possibilities  for  income  payment. 

The  reader  will  bear  in  mind  the  fact  that  all  prop- 
erty does  not  pay  measurable  income.  Farms  worked 
by  the  owner,  houses  tenanted  by  the  owner,  tools 
used  by  the  owner,  and  other  forms  of  property  that 
are  directly  employed  by  the  owner  to  yield  him 
goods,  services,  or  satisfactions,  must  be  excluded  from 
the  discussion,  because,  first,  they  do  not  yield  pur- 
chasing power  (the  definition  here  used  for  income), 
and  second,  because  they  are  wholly  unmeasurable. 

Another  factor  must  be  taken  into  account.  All 
of  the  property  which  might  yield  purchasing  power 
does  not  necessarily  do  so.  There  are  mines,  rail- 
roads, factories,  and  stores,  which,  operated  on  the 
margin  of  bankruptcy,  never  make  any  return  on  the 
property.  All  enterprises  must  pay  interest  on  bonds 
or  be  declared  insolvent,  but  in  great  numbers  of 
cases  dividends  are  not  paid  on  capital  stock.  The 
Interstate  Commerce  Commission  reports  that  in 
1911,  32  per  cent,  of  the  stock  of  American  railroads 


132  INCOME 

was  paying  no  dividend.1  Thus  nearly  three  billions 
of  railroad  property,  which  on  its  face  should  yield  an 
income  return,  does  not  do  so. 

Property  income  not  only  varies  greatly  from  one 
enterprise  to  another,  but  it  varies  considerably  from 
year  to  year.  Thus  the  railroads  of  the  United  States 
paid  in  dividends  2 

1908 $390,695,000 

1909 321,072,000 

1910 405,771,000 

1911 460,195,000 

1912 400,315,000 

These  figures  could  probably  be  duplicated  in  the 
annals  of  any  other  general  industry  of  the  country. 
Indeed,  there  are  many  industries  in  which  the  varia- 
tion would  be  far  more  extreme. 

There  is  one  further  drawback  to  the  accuracy  of 
income  facts.  Many,  and  those  from  industrial  enter- 
prises in  particular,  are  in  certain  cases  wholly  un- 
available.3 Commissions  and  investigating  bodies 
have  gone  thoroughly  into  the  property  incomes  paid 
by  public  utilities,  but  thus  far  the  inquiries  into 
the  returns  on  property  invested  in  industrials  have 
been  meager  and  unsatisfactory  in  the  extreme. 

1  "  Statistics  of  Railways,"  1911,  op.  cit.,  p.  35. 

3  Statistical  abstract  of  the  U.  S.,  1913,  op.  cit.,  p.  272. 

3  The  Moody  Company,  in  reply  to  an  inquiry  for  compilations 
showing  total  interest  and  dividends  paid  by  industrials  in  the  United 
States,  writes — "So  far  as  we  can  see,  it  would  be  difficult  to  compile 
any  totals  which  would  represent  anything  more  than  somebody's 
estimate.  In  many  of  the  States  no  returns  are  required  from  the 
companies  showing  the  amount  of  dividends  paid,  and  in  fact,  there 
are  thousands  of  industrial  corporations  whose  operations  are  ab- 
solutely inaccessible  to  outsiders."  (Letter  dated  May  6,  1914.) 


PROPERTY   INCOME   PAID   IN   UNITED   STATES     133 

The  facts  regarding  the  property  incomes  paid  by 
certain  classes  of  income-yielding  property  (public 
utilities,  financial  institutions,  and  the  like)  are  easily 
accessible.  The  returns  for  the  great  mass  of  indus- 
trial capital  are  indicative  rather  than  conclusive. 
They  are  significant  for  what  they  suggest,  rather  than 
for  what  they  prove.  While  it  will  be  impossible  to 
compile  and  present,  in  this  chapter,  the  total  amount 
of  all  property  incomes  paid  in  the  United  States,  it 
will  be  possible  to  show  the  extent  of  the  known  facts, 
the  relation  between  property  values  and  property 
income,  and  the  possibilities  for  further  studies  by 
official  bodies.  The  study  of  property  income  is  still 
in  its  infancy.  The  work  of  securing  data  and  of  pre- 
senting it  in  formulated  detail  has  been  attempted  in 
only  a  few  instances.  Nevertheless,  some  beginning 
must  be  made  if  the  incomes  yielded  by  services  are 
to  be  differentiated  from  the  incomes  yielded  by  prop- 
erty. The  data  at  hand  seem  to  indicate  that  the 
time  for  such  a  beginning  has  arrived. 

//.  The  Basis  for  Computing  Property  Incomes 

Were  the  means  at  hand,  the  simplest  method  of 
attaining  the  goal  of  this  chapter  would  be  to  put  in 
a  column  the  total  amounts  paid  in  interest  and  in  divi- 
dends by  the  various  industrial  enterprises,  and  add 
the  column.  There  would  be  in  a  single  sum  the 
answer  to  the  question  regarding  the  total  payments 
of  property  income  in  the  United  States  for  a  given 
year.  The  complexity  of  the  figures,  and  the  numerous 
omissions,  make  any  such  simple  procedure  impossible. 

Lacking  the  figures  for  adding  up  a  total,  the  next 


134  INCOME 

handiest  method  for  showing  the  total  of  property 
income  would  be  to  arrive  at  some  formula — to  say 
that  the  amount  of  property  income  in  a  given  in- 
dustry is  equal  to  a  certain  per  cent,  of  gross  earnings, 
of  capital  stock,  of  net  earnings,  or  of  some  other 
measure  of  business  values. 

There  are  certain  known  quantities  which  may  be 
employed  as  premises  for  the  solution  of  this  property 
income  problem.  The  United  States  Commissioner 
of  Internal  Revenue  has  a  fairly  complete  record  of 
the  total  bonded  indebtedness  of  corporations  in  the 
United  States.  He  has,  likewise,  a  total  for  the 
capital  stock  and  for  the  net  income  of  corporations. 
There  are  a  large  number  of  cases  in  which  the  man- 
uals of  industrial  statistics  furnish  a  statement  of 
dividends  paid.  In  certain  industries,  chiefly  public 
utilities,  the  amounts  paid  in  the  form  of  property 
income  have  all  been  spread  upon  the  records. 

The  most  satisfactory  basis  for  a  computation  of 
property  income  is  some  form  of  business  receipts — 
gross  earnings,  net  earnings,  gross  income,  or  net 
income.  These  four  terms  have  a  fairly  specific 
meaning  in  corporation  accounting.  Gross  earnings 
is  the  total  of  sales  or  total  receipts  secured  in  the 
general  run  of  business.  Net  earnings  equal  gross 
earnings  minus  the  cost  of  raw  materials  and  the 
manufacturing  costs.  Gross  income  is  net  earnings 
plus  income  from  any  outside  sources,  such  as  securi- 
ties held  in  other  companies.  Net  income  is  gross 
income  minus  interest  and  taxes.  The  plan  followed 
by  the  United  States  Census  of  subtracting  the  cost 
of  raw  materials  from  the  total  value  produced  (prac- 
tically the  gross  earnings)  creates  a  fifth  class — "value 


PROPERTY   INCOME   PAID   IN  UNITED   STATES     135 

added  by  manufacture."  This  fifth  class  is  undoubt- 
edly the  most  satisfactory  for  the  purpose  of  an  in- 
come study,  because  it  gives  the  amount  of  value  for 
which  the  industry  under  consideration  is  actually 
responsible.  Since,  however,  the  "value  added  by 
manufacture"  corresponds  directly  with  no  account- 
ing term,  it  is  impossible  to  work  with  it,  except  in 
connection  with  Census  returns.  For  practical  pur- 
poses, "gross  sales"  or  "gross  income,"  corresponding 
closely  to  "value  of  products"  (Census),  affords  the 
best  basis  for  comparison.  Unfortunately,  it  is  seldom 
available. 

In  the  course  of  this  study,  each  one  of  these  terms 
has  been  tested  in  the  hope  that  one  of  them  might 
afford  an  accurate  basis  for  income  computation. 
One  by  one  they  have  been  rejected,  as  each  proved 
inadequate. 

By  chance,  the  figures  coming  most  readily  to  hand 
at  the  present  time  are  those  for  net  income.  The 
Federal  Corporation  Tax  is  a  tax  on  net  income. 
Since  the  Commissioner  of  Internal  Revenue  pub- 
lished, in  the  same  connection,  a  statement  showing 
the  total  bonded  indebtedness,  it  is  possible  to  com- 
pute, with  a  reasonable  degree  of  accuracy,  the  total 
property  income  which  is  paid  by  the  leading  industries 
of  the  country. 

One  other  fact  should  be  borne  in  mind  throughout 
the  analysis.  The  total  apparent  property  income 
(interest  plus  dividends)  does  not  show  the  real  situa- 
tion accurately.  Out  of  net  income  are  paid  deprecia- 
tion and  amortization  charges  and  dividends.  Large 
funds  are  frequently  available  after  dividends  are 
paid.  These  are  set  aside  under  the  name  of  "surplus " 


136  INCOME 

or  "undivided  profits."  In  some  instances  the  write- 
off for  depreciation  has  been  so  great  that  the  depre- 
ciation fund,  at  any  given  time,  will  approximate  the 
total  value  of  the  property.  In  other  instances,  enor- 
mous surpluses  are  accumulated.  If  to  these  facts 
is  added  the  further  consideration  that  many  proper- 
ties have  been  rebuilt  and  greatly  increased  in  value 
by  appropriations  made  out  of  earnings,  it  becomes 
clear  that  the  total  interest  and  dividend  payments 
represent  but  a  part  of  the  fund  which  will  ultimately 
appear  in  the  form  of  property  income.  Therefore, 
even  in  case  it  were  possible  to  secure  a  statement  of 
interest  and  dividends  paid,  this  sum  would  not  in- 
clude the  potential  property  incomes  that  have  been 
appropriated  to  funds  that  augment  property  values. 

///.  Where  Do  Industrial  Values  Go  ? 

Thoughtful  people,  wholly  oblivious  of  the  difficul- 
ties in  the  case,  are  asking  themselves  a  number  of 
serious  questions  concerned  with  the  distribution  of 
industrial  values.  The  industrial  processes  create 
great  masses  of  wealth.  Who  gets  it?  Inventions 
and  improvements  increase  efficiency  and  facilitate 
production.  Where  do  the  benefits  go?  Society  in- 
creases wealth  at  a  rate  unheard  of  in  the  past.  Why 
are  some  still  poor?  Aside  from  occasional  dishonesty 
and  fraud,  what  happens  to  the  great  bulk  of  values 
with  which  the  modern  industrial  system  daily  sup- 
plies the  world? 

A  successful  income  study  will  formulate  for  groups 
of  industries,  and  for  industries  generally,  a  tentative 
answer  to  such  questions.  Perhaps  the  matter  can 


PROPERTY  INCOME   PAID   IN  UNITED   STATES     137 

be  most  satisfactorily  stated  in  this  concrete  way. 
An  industry  adds  a  hundred  dollars  to  the  total  value 
extant  in  society.  What  happens  to  that  one  hundred 
dollars  in  values  after  it  is  produced?  A  part  of  it 
goes  to  pay  for  services  (wages  and  salaries);  a  part 
goes  to  pay  for  upkeep  and  improvement  of  plant;  a 
part  goes  for  depreciation,  insurance,  and  taxes;  a 
part  is  used  to  pay  interest  on  the  bonded  indebted- 
ness; and  a  part  goes  for  dividends,  leaving  a  balance, 
or  "surplus"  which  is  stored  up  against  a  rainy  day. 

The  element  in  the  problem  of  apportioning  the 
hundred  dollars,  which  is  of  present  interest,  is  the 
part  that  is  paid  in  the  form  of  interest  and  dividends. 
The  figures  now  available  make  practicable  two 
methods  of  computing  property  income  payments. 
In  the  first  place,  the  returns  derived  by  the  Commis- 
sioner of  Internal  Revenue  through  the  payment  of 
the  corporation  tax,  give  many  of  the  essential  facts. 
If  in  addition  to  this  computation,  the  separate  figures 
for  individual  industries  not  included  in  the  Commis- 
sioner's tables  are  aggregated,  some  idea  of  the  total 
property  income  paid  by  the  industries  of  the  country 
may  be  obtained.  In  the  second  place,  the  Commis- 
sioner's figures  may  be  laid  aside,  and  all  of  the  in- 
stances of  property  income  payments  which  are 
available  may  be  added  together.  This  method  will 
cover  only  a  fraction  of  the  cases  included  in  the 
Report  of  the  Commissioner  of  Internal  Revenue. 
The  best  idea  of  the  total  payments  in  the  form  of 
property  income  will  probably  be  secured  by  adding 
to  the  figures  adduced  by  the  Commissioner,  such 
other  available  figures  as  are  not  included  in  his 
report. 


138  INCOME 

IV.  The  Corporation  Tax  Returns 

The  United  States  Commissioner  of  Internal  Reve- 
nue is  authorized  to  collect  a  tax  on  the  net  income 
of  corporations.  The  facts  which  come  to  his  hand 
in  pursuance  of  this  duty  are  classified  by  him  and 
tabulated  in  one  section  of  his  annual  report.  No 
other  source  contains  so  large  a  mass  of  facts  about 
corporation  income. 

The  figures  as  presented  are  susceptible  of  little 
interpretation.  The  facts,  compiled  by  revenue 
districts,  are  given  for  five  classes  of  corporations — 
financial  and  commercial  corporations,  public  utilities, 
industrial  and  manufacturing  corporations,  mercan- 
tile corporations,  and  miscellaneous  corporations. 
No  classification  is  made  as  to  size,  and  there  is  no 
analysis  into  smaller  units  than  the  classes,  or  rather 
the  masses,  above  noted.  The  student  of  income 
statistics  cannot  help  regretting  that  so  valuable  a 
body  of  information  as  that  contained  in  the  Com- 
missioner's report,  cannot  be  made  the  subject  of 
an  extended  analysis.  Its  possibilities  are  immense. 

The  report  of  the  Commissioner  for  1913  l  shows 
totals  as  follows: 

Total  establishments 305,336 

Capital  stock $61,738,000,000 

Bonded  and  other  indebtedness. .  $34,750,000,000 
Net  income $  3,832,000,000 

1  "Annual  Report  of  the  Commissioner  of  Internal  Revenue," 
1913.  Op.  tit.,  pp.  91-102.  The  report  for  1913  is  selected  because 
the  returns  are  much  more  complete  than  those  for  1912,  when  the 
enforcement  of  the  corporation  tax  law  was  in  a  more  experimental 
stage. 


PROPERTY  INCOME  PAID  IN  UNITED   STATES     139 

The  total  value  of  the  stocks  and  bonds  ($96,000,000,- 
ooo)  is  divided  between  stocks  and  bonds  in  the  ratio 
of  two  dollars  of  stocks  for  one  of  bonds.  The  net 
income,  or  the  amount  that  a  corporation  has  at  its 
disposal  after  all  of  the  costs  of  doing  business  have 
been  met,  totals  slightly  less  than  $4,000,000,000. 

The  total  property  income  represented  in  these 
ninety-six  billions  of  capitalization  is  equal  to  the 
interest  paid  on  the  bonds  plus  the  dividends  paid  on 
the  stock.  While  the  amount  of  the  interest  charge 
may  be  computed  with  a  reasonable  degree  of  accu- 
racy, the  problem  of  dividend  payments  can  be  subject 
to  estimates  alone. 

The  "bonded  and  other  indebtedness"  ($34,750,- 
000,000)  is  a  form  of  property  which  returns  a  regular 
income.  At  the  present  writing,  bond  issues  ordinarily 
yield  from  4  to  6  per  cent.,  with  5  per  cent,  as  the 
usual  rate.  Five  per  cent,  of  the  total  bonded  in- 
debtedness is  $1,737,500,000  or  in  round  numbers — a 
billion  and  three-quarters. 

The  amount  of  property  income  paid  by  a  third  of 
the  total  capitalization  of  the  corporations  reporting 
to  the  Commissioner  of  Internal  Revenue,  is  readily 
secured.  The  bonds  of  these  corporations  yield  an 
annual  property  income  of  approximately  a  billion 
and  three-quarters.  The  question  as  to  the  amount 
of  dividends  paid  on  the  capital  stock  cannot  be  dis- 
posed of  in  any  such  offhand  manner.  There  are  two 
ways  in  which  its  solution  may  be  broached.  On  the 
one  hand,  some  estimate  of  the  proportion  of  net 
income  paid  out  in  the  form  of  dividends  may  be 
made.  On  the  other  hand,  some  ratio  may  be  secured 
between  capitalization  and  dividends.  In  either  case 


140 


INCOME 


an  appeal  must  be  made  to  the  more  detailed  figures 
cited  by  the  Commissioner. 

TABLE  XII. — DETAILED  CORPORATION  TAX  RETURNS  FOR  1013 l 


Bonded  and 

Other  Indebted- 

Kind of  Business     Capital  Stock 

ness              Net  Income 

Class  A. 

Banks,  Trust  Com- 

Financial and 

panies,  Surety  Com- 

Commercial 

panies,  and  Insur- 

Corporations. 

ance  Companies. 
(33,234)            $3,030,809,083 

$498,612,171     $481,632,357 

Class  B. 

Railroads,    Steam- 

Public 

boats,  Pipe  Lines, 

Service. 

Gas,      Transporta- 

tion, Storage,  Tele- 

graph   and    Tele- 

phone. 

(25,585)             120,816,984,793 

$19,584,132,849     $930,387,528 

Class  C. 

Mining,     Lumber, 

Industrial  and 

all    Manufactures, 

Manufactur- 

Refining,   Packing 

ing. 

and  Canning. 

(96,122)             $26,542,060,403 

$8,381,811,628  $1,670,333,724 

Class  D. 

Dealers    in     Coal, 

Mercantile. 

Lumber,  Grain,  and 

all  other  Merchan- 

dise. 

(67,325)             $4,087,130,423 

$2,356,514,388     $423,012,178 

Class  E. 

Architects,     Con- 

Miscellaneous. 

tractors,    Hotels, 

Theaters. 

(83,070)            $7,261,243,029 

$3,928,445,317     $326,794,625 

Total 305,336 


$61,738,227,731  $34,749,516,354  $3,832,150,411 


The  report  of  the  Commissioner  shows  a  wide  varia- 
tion in  the  ratio  of  bonds  to  stocks.  Among  the 
financial  institutions,  the  capital  stock  is  five  times  the 
bonded  indebtedness.  The  public  service  utilities 
report  bonded  indebtedness  equal  to  capital  stock. 
For  industrial  and  manufacturing  enterprises  the 
bonded  indebtedness  is  one-third  of  the  capital  stock. 

It  is  also  worth  noting  that  the  proportion  of  securi- 
ties represented  by  the  various  classes  is  very  different. 
Public  service  stocks  and  bonds  make  up  two-fifths 
of  the  whole;  industrial  and  manufacturing  stocks  and 

1 "  Annual  Report  of  the  Commissioner  of  Internal  Revenue," 
1913.  Op.  cit.,  pp.  91-102. 


bonds  make  up  a  third  of  the  whole.  The  other  three 
classes  cover  only  about  a  quarter  of  the  total  capi- 
talization. 

V.  An  Estimate  of  Dividend  Payments 

While  it  is  not  possible  in  all  cases  to  secure  figures 
showing  the  relation  between  both  dividends  and  net 
earnings,  and  dividends  and  capitalization,  some 
idea  may  be  obtained  by  the  use  of  either  method,  or, 
where  facts  permit,  of  both  methods,  that  will  furnish 
the  basis  for  an  estimate  of  dividend  payments. 

A  ninth  of  the  corporations  reporting  to  the  Com- 
missioner are  in  Class  A,  "Financial  and  Commercial 
Corporations."  The  total  capital  stock  of  these  33,234 
corporations  is  $3,030,809,083.  What  is  the  prevail- 
ing dividend  rate  for  such  enterprises? 

The  reports  made  by  financial  and  commercial  cor- 
porations are  in  such  a  form  that  it  is  easier  to  state 
the  percentage  of  dividends  to  capital  stock  than  to 
net  income.  Data  compiled  by  the  Comptroller  of 
the  Currency  show  a  dividend  rate  for  all  national 
banks  of  11.40  per  cent,  on  capital  stock.1  The 
"  Manual  of  Statistics,"  lists  1,313  banks  and  trust 
companies.2  For  these  companies  the  dividend  rate 
in  1912  was — 

Under  5  per  cent.  for    56  banks 

From    5  to    9  per  cent.  "  623      " 

"      10  "  14    "     "       "  425      " 

"      15  "  19    "     "       "     95      " 
20  per  cent,  and  over       "   114     " 

Total 1,313 

1  "Report  of  the  Comptroller  of  the  Currency,"  1912.     Washing- 
ton, Government  Printing  Office,  1914,  pp.  302-305. 

2  "Manual  of  Statistics,"  op.  cit.,  pp.  1045-1104. 


142  INCOME 

The  Comptroller  of  the  Currency  reports,  as  the  out- 
come of  a  circular  sent  to  banks  throughout  the  coun- 
try, that  the  dividend  rate  for  State  banks  was  10.6 1 
per  cent.;  for  stock  savings  banks,  9.64  per  cent.;  for 
private  banks,  14.52,  and  for  loan  and  trust  com- 
panies, 1 2. 6 1  per  cent.1  Approximately  one-half  of 
the  banks  of  each  class  answered  the  Comptroller's 
questions.  The  dividend  rate  for  insurance  companies 
is  in  the  same  general  proportion  as  that  for  banks 
and  trust  companies.  All  companies  reporting  to 
the  New  York  State  Insurance  Department  in  1911 
showed  a  total  dividend  equal  to  u  per  cent,  of  the 
capital  stock.2  Taking  all  of  these  facts  into  con- 
sideration, it  would  seem  very  conservative  to  con- 
clude that  10  per  cent.,  on  the  capital  stock  or 
$300,000,000,  was  paid  in  annual  dividends  by  the 
financial  and  commercial  corporations  listed  in  the 
Commissioner's  report. 

The  figures  for  public  service  corporations  may 
likewise  be  estimated.  The  railroads  of  the  country, 
with  a  total  capital  stock  (1912)  of  $8,622,400,821, 
paid  in  dividends  $400,315,313,  or  4.7  per  cent.  It 
is  worth  noting  that  in  1912  only  64.73  Per  cent,  of 
the  stocks  paid  dividends.  Those  stocks  which  did  pay 
dividends  paid  an  average  rate  of  7.2  per  cent.3  The 
rate  of  dividend  return  on  two-fifths  of  the  capitaliza- 
tion in  Class  B  is  therefore  slightly  less  than  5  per 
cent,  of  the  capital  stock. 

1  "Report  of  the  Comptroller  of  the  Currency,"  1910.    Washing- 
ton, Government  Printing  Office,  1911,  p.  831. 

2  "The  Insurance  Year  Book,"  1911-12.  New  York,  The  Spectator 
Company,  1911,  pp.  311-315. 

3  "Statistical  Abstract  of  the  United  States,"  1913,  op.  cit.,  pp.  271- 
272. 


PROPERTY  INCOME  PAID  IN  UNITED  STATES  143 

The  reports  from  telephone  and  telegraph  com- 
panies show  the  following  facts:  The  telephone  com- 
panies, with  a  capital  stock  of  $586,763,879,  paid 
$34,120,809  in  dividends  (1912),  or  a  dividend  rate  of 
5.8  per  cent.1  The  land  and  ocean  telegraph  systems, 
with  a  capital  stock  of  $163,645,810,  paid  $6,180,061 
in  dividends,  or  an  average  rate  of  3.8  per  cent.2  The 
overwhelming  proportion  of  capital  invested  in  tele- 
phones raises  the  dividend  rate  for  these  two  industries 
well  above  5  per  cent. 

The  Census  figures  for  municipal  utilities  show  that 
central  electric  light  and  power  stations,  with  capital 
stock  of  $1,154,587,016  paid  dividends  amounting  to 
$34,580,872,  an  equivalent  of  2.9  per  cent.,  while 
street  and  electric  railways,  with  a  capital  stock  of 
$2,383,344,513,  paid  dividends  of  $70,992,218,  or  a 
dividend  rate  of  2.9  per  cent.3  The  data  on  public 
service  corporations  leads  to  the  inference  that  an 
estimated  dividend  return  of  4  per  cent,  would  seem 
justifiable.  Four  per  cent,  on  the  capital  stock  of  the 
public  service  corporations  would  equal  approximately 
$800,000,000. 

The  dividend  returns  on  the  capital  stock  of  the 
industrial  and  manufacturing  corporations  in  Class  C, 
which,  incidentally,  reports  a  larger  total  of  capital 
stock  than  any  other  class  of  corporations  cited  by 
the  Commissioner,  cannot  be  estimated  with  any  de- 
gree of  satisfaction.  As  already  explained,  the  ratio 

1  "Telephones  and  Telegraphs,"  1912,  Bulletin  123,  Bureau  of  the 
Census,  op.  cit.,  p.  20. 

2  Supra,  p.  24. 

'"Central  Electric  Light  and  Power  Stations  and  Street  and 
Electric  Railways,"  1912,  Census  Bulletin  124,  op.  cit.,  pp.  21,  97, 
and  113. 


144  INCOME 

between  capital  stock  and  dividends,  or  between  net 
income  and  dividends,  is  not  at  all  constant  from  one 
industry  to  another.  A  reading  of  many  corporation 
statements  makes  possible  this  statement:  The  as- 
sumption that  half  of  the  net  income  is  paid  in  the 
form  of  dividends  is  highly  conservative.  It  would 
probably  be  fairer  to  state  the  proportion  at  from 
two-thirds  to  three-quarters. 

The  two  classes  of  corporations  included  by  the 
Commissioner  under  "mercantile"  and  " miscel- 
laneous" lend  themselves  to  no  analysis  whatever 
as  regards  ratio  between  dividend  payments  and 
capital  stock.  Only  a  comparatively  few  of  such  cor- 
porations are  listed  in  the  manuals,  and  their  reports 
are  so  fragmentary  as  not  to  warrant  any  generaliza- 
tions whatever. 

So  much  for  the  analysis  of  the  ratio  between  divi- 
dends and  capital  stock.  There  remains  the  possi- 
bility of  estimating  the  ratio  of  dividends  to  net 
income  in  the  two  largest  classes  cited  by  the  Com- 
missioner. Fortunately  for  the  validity  of  the  total 
estimate,  these  two  classes  report  more  than  three- 
quarters  of  the  total  capital  stock  of  all  corporations. 
The  ratio  between  net  income  and  total  revenue  in 
Class  B  varies  considerably  from  one  industry  to 
another.  The  net  income  of  the  American  railroads 
cited  in  the  Statistical  Abstract  as  "available  for  divi- 
dends, adjustments,  and  improvements"  was  in  1910, 
$515,738,522.  Of  this  amount,  $293,836,863  was 
paid  in  net  dividends.  The  ratio  of  dividends  to  net 
income  was  therefore  2  to  5,  or  55.9  per  cent.1 

The  telephone  systems  report  a  net  income  of 

1  "Statistical  Abstract  of  the  United  States,"  1913,  op.  cit.,  p.  273. 


PROPERTY   INCOME   PAID   IN  UNITED   STATES     145 

$51,326,325  and  a  total  dividend  payment  of  $34,120,- 
809.  The  proportion  of  dividends  to  net  income  is 
here  66.4  per  cent.1  The  telegraph  systems,  with  a 
net  income  of  $6,383,981,  paid  in  dividends  $6,180,061, 
or  a  rate  of  96.8  per  cent.2 

The  income  account  for  central  electric  light  and 
power  stations  presented  by  the  Census  gives  no 
clear  statement  of  net  incomes.  For  street  and  elec- 
tric railways,  however,  the  net  income  in  1912  was 
$81,425,748.  Of  this  amount,  $70,992,218,  or  87.1 
per  cent.,  was  paid  in  dividends.3  These  figures 
would  make  it  appear  that  the  $800,000,000  estimated 
as  the  total  dividend  return  from  Class  B  corporations 
is  somewhat  high,  since  such  a  return  is  equal  to  more 
than  four-fifths  of  the  total  net  income. 

There  seems  to  be  but  one  possible  means  of  esti- 
mating dividend  returns  for  Class  D  and  Class  E 
corporations.  All  of  the  facts  available  indicate  that 
for  public  service  corporations,  and  for  industrial  and 
manufacturing  corporations,  from  two-thirds  to  nine- 
tenths  of  the  net  income  is  paid  in  the  form  of  divi- 
dends. The  total  net  income  for  corporations  in 
Class  D  and  Class  E  was  $749,806,803.  If  three- 
quarters  of  this  net  income  was  paid  out  in  the  form  of 
dividends,  the  dividend  return  for  these  two  classes  of 
corporations  would  equal  approximately  $550,000,000. 

All  of  the  facts  derived  in  the  course  of  this  series 
of  estimates  may  be  included  in  a  table  which  must  be 
accepted  as  a  table  of  estimates  rather  than  of  exacti- 
tudes. 

1  "Telephones  and  Telegraphs,"  1912,  op.  tit.,  p.  19. 

2  Ibid,  p.  24. 

3  "Central  Electric  Light  and  Power  Stations,"  op.  tit.,  p.  97. 


146 


INCOME 


TABLE  XIII. — DIVIDEND  PAYMENTS  ESTIMATED  ON  CORPORATION  TAX  RETURNS 


Estim 
Rate 
Capital  Stock    Divide 
Clan  A. 
Financial 
and  Commer- 
cial Corpora- 
tions       $3,030,809,083        10 

ated                              Estimated 
of                              Per  Cent,  to          Total 
nds     Net  Income       Dividends        Dividends 

$481,622,357                         $300,000,000 
$930,387.528          80             $800,000,000 

$1,670,333,724          50             $830,000,000 
$423,012,178          50             $210,000,000 
$326,794,625           50              $160,000,00 

Class  B. 
Public 
Service     .  .  .  $20,816,984,793          4 

Class  C. 
Industrial 
and  Manu- 
facturing —  $26,542,060,403 
Class  D. 
Mercantile.  .  .    $4,087,130,423 
Class  £. 
Miscellaneous.  $7,261,243,029 

Total,  Estimating  Classes  C,  D, 
Total,  Estimating  Classes  C,  D. 

and  E  at  50  per  cent  

$2  3OO  OOO.OOO 

and  E  at  75  per  cent.  . 

.    $2,000.000,000 

Like  all  estimates,  the  ones  here  presented  are  sub- 
ject to  severe  limitations.  In  the  first  place,  they  are 
merely  crude  computations  from  the  data  which  in 
none  of  the  instances  are  sufficiently  extensive  to 
warrant  accurate  statements.  There  is  another  serious 
limitation  to  the  accuracy  of  the  report — it  refers  to 
corporations  only.  While  it  is  true  that  the  financial 
and  public  service  industries  are  conducted  almost 
wholly  under  corporation  management,  only  one- 
fourth  of  the  manufacturing  establishments  are 
operated  by  corporations.  To  be  sure,  this  quarter 
employs  three-fourths  of  the  wage-earners,  and  turns 
out  nearly  four-fifths  of  the  total  manufactured  prod- 
ucts.1 Nevertheless,  there  is  a  considerable  margin 
of  difference  between  the  property  income  from  all 
manufacturing  enterprises  and  property  income  from 
corporation-owned  enterprises.  As  regards  the  ques- 
tion of  corporation  control  in  the  mercantile  and  mis- 

1  "Manufactures,"  Thirteenth  Census  of  the  United  States,  1910, 
Volume  Vin,  Washington,  Government  Printing  Office,  1913,  p.  135. 


PROPERTY  INCOME   PAID   IN  UNITED  STATES     147 

cellaneous  groups  listed  by  the  Commissioner  of  Cor- 
porations, it  is  obviously  impossible  to  form  any  ac- 
curate estimate,  because  of  the  lack  of  statistical  data. 
Still  it  is  in  these  mercantile  and  miscellaneous  lines 
that  the  greatest  number  of  small  businesses  persist. 

VI.  The  Results  of  the  Corporation  Tax  Figures 

Some  rough  estimate  is  now  in  order  covering  the 
facts  brought  out  in  the  tables  presented  by  the  Com- 
missioner of  Internal  Revenue.  Crude  as  are  the 
means  which  have  been  resorted  to  in  deriving  esti- 
mates for  a  part  of  the  property  income  which  is  repre- 
sented in  these  figures,  the  results  possess  a  real  sig- 
nificance for  the  student  of  income. 

The  figures  relating  to  interest  charges  are  as  ac- 
curate as  could  be  expected.  The  rate  of  return  on 
bonds  is  so  uniform  that  the  percentage  of  error  result- 
ing from  the  use  of  a  5  per  cent,  interest  rate  is  prob- 
ably modest  in  the  extreme.  In  so  far  as  the  figures 
presented  by  the  Commissioner  of  Internal  Revenue 
possess  significance,  it  is  probably  very  near  the  truth 
to  say  that  the  funded  debt  of  the  corporations  report- 
ing to  the  Commissioner  of  Internal  Revenue  pays  a 
property  income  which  amounts  annually  to  about 
one  and  three-quarter  billions  of  dollars. 

The  total  amount  of  property  income  yielded  by 
corporation  securities  includes  the  dividends  paid  on 
stock  as  well  as  the  interest  paid  on  bonds.  The 
figures  given  by  the  Commissioner  of  Internal  Revenue 
for  total  net  income  fixes  the  maximum  of  dividends. 
The  actual  amount  of  dividends  paid  must  remain  for 
the  present  a  matter  of  estimate.  In  the  case  of  finan- 


148  INCOME 

cial  institutions  and  public  utilities,  the  estimate  of 
total  dividends  must  be  fairly  accurate.  In  the  other 
three  instances,  industrial  corporations,  mercantile 
corporations,  and  miscellaneous  corporations,  the  es- 
timates degenerate  into  the  merest  guesses.  Sup- 
posing that  50  per  cent,  of  the  total  net  income  of 
these  three  classes  of  corporations  is  paid  out  in  the 
form  of  dividends,  the  total  dividend  payments  made 
by  the  corporations  under  consideration  would  equal 
about  two  and  a  quarter  billions.  If  the  proportion 
of  net  income  devoted  to  dividends  by  these  corpora- 
tions reached  75  per  cent.,  the  total  of  dividend  pay- 
ments would  aggregate  almost  three  billions.  The 
inadequate  data  at  hand  suggest  that  the  truth  lies 
somewhere  between  these  two  extremes. 

Should  the  first  guess  prove  correct,  and  it  is  surely 
a  minimum,  the  total  amount  of  property  income  paid 
by  the  corporations  reporting  to  the  Federal  Govern- 
ment would  equal  almost  exactly  four  billions  annually. 
Should  the  latter  estimate  be  correct,  the  amount 
would  exceed  four  and  a  half  billions.  In  either  case, 
the  total  of  property  income  paid  by  American  cor- 
porations has  reached  vast  proportions. 

VII.  Some  Additions  to  the  Commissioner's  Figures 

The  corporation  figures  printed  by  the  Commis- 
sioner of  Internal  Revenue,  as  has  already  been 
stated,  include  only  a  part  of  the  total  income-paying 
property  in  the  United  States.  Although  the  cor- 
porations cited  are  of  major  business  significance,  their 
securities  by  no  means  exhaust  the  property  income 
possibilities. 


PROPERTY   INCOME   PAH)   IN   UNITED   STATES     149 

The  absence  from  the  Commissioner's  figures  of 
those  business  values  not  included  under  corporate 
control  has  already  been  referred  to.  Unfortunately, 
the  available  facts  do  not  permit  of  any  accurate  state- 
ment of  the  total  amount  of  business  thus  overlooked. 
If,  as  has  been  suggested,  the  amount  of  business  not 
counted  in  these  figures  is  equivalent  to  fifteen  or 
twenty  billions  additional,  another  three-quarters  of 
a  billion  or  perhaps  a  billion,  would  be  added  to  the 
total  property  income  paid  annually  by  this  group  of 
industries. 

The  most  important  items  in  property  income  aside 
from  the  facts  published  by  the  Commissioner  of  In- 
ternal Revenue,  are  probably  included  in  house  rent, 
farm  rent,  interest  on  mortgages,  and  other  similar 
charges.  It  is  not  possible  in  this  case  to  make  a 
statement  of  the  facts.  Rather  a  cursory  summary 
must  suffice,  in  view  of  the  extreme  paucity  of  the 
available  data.  It  must  be  clear,  however,  that  any 
items  of  property  income  paid  in  the  form  of  house 
rent,  farm  rent,  and  the  like,  are  in  addition  to  the 
estimates  of  the  property  income  already  ascertained 
from  the  publications  of  the  Commissioner  of  Internal 
Revenue. 

The  Census  reports  a  total  of  20,255,555  homes  in 
the  United  States  for  1910.  Of  these  homes,  6,123,610 
were  farm  homes,  and  14,131,945  were  other  homes. 
The  farm  homes  thus  constituted  a  little  less  than  a 
third  of  the  total.  The  Census  shows  that  among 
the  fourteen  million  homes  other  than  farm  homes, 
almost  two-fifths  (38.4  per  cent)  were  owned  by  the 
families  living  in  them,  while  only  25  per  cent  were 
owned  free  of  mortgages.  Suppose  that  each  of  the 


150  INCOME 

families  living  in  these  homes  spent  five-  hundred 
dollars  a  year.  Among  people  whose  expenditure 
does  not  exceed  a  thousand  dollars  per  year,  the  pro- 
portion spent  for  rent  varies  from  one-sixth  to  one- 
third  of  the  total  expenditure.  Assume  for  the  pres- 
ent purpose  that  the  families  under  consideration 
spent  a  fifth  of  their  income  for  rent,  each  of  the  ten 
million  renting  families  would  therefore  be  spending 
a  hundred  dollars  per  year  for  rent,  and  the  total 
property  returns  derived  by  the  owners  of  this  prop- 
erty would  be  $1,000,000,000.  Out  of  this  total,  the 
landowner  would  pay  for  taxes,  repairs,  and  interest 
on  his  investment,  or  property  income.  The  families 
(nearly  two  million)  who  lived  in  mortgaged  homes, 
would  pay  an  annual  interest  charge.  There  is  no 
way  in  which  the  amount  of  this  payment  can  be 
approximated.  A  somewhat  similar  estimate  of  prop- 
erty income  values  in  the  case  of  farms,  may  be 
made  from  the  Census  figures.  The  total  value  of  the 
land  and  buildings  on  American  farms  was,  in  1910, 
$34,000,000,000.  Among  the  farms  42.5  per  cent, 
owned  their  farms  free  of  mortgage;  20.3  per  cent, 
owned  mortgaged  farms;  and  37.2  per  cent,  rented 
their  farms.  Consider  first  the  rented  farm,  which 
constitute  between  one-third  and  two-fifths  of  the 
total  number  of  farms  in  the  country.  One-third  of 
the  total  value  of  land  and  buildings  would  be  almost 
twelve  billions  of  dollars.  If  the  amount  of  net  rent 
(total  rent  less  taxes  and  improvements)  paid  by  the 
tenant  equaled  3  per  cent,  of  the  valuation,  the  total 
amount  of  property  income  paid  to  farm  owners  by 
renters  would  equal  three  hundred  and  fifty  millions. 
The  percentage  of  return  is  here  set  at  such  a  low 


PROPERTY   INCOME   PAID   IN   UNITED   STATES     !$! 

figure  as  three  per  cent,  because  everywhere  it  is  being 
urged  that  with  farm  land  values  at  their  present 
height,  the  farmer  cannot  make  more  than  3  per 
cent,  on  the  valuation  of  his  property.  Even  at  that, 
however,  the  property  income  paid  by  the  farmers 
would  equal  a  third  of  a  billion.  The  information  re- 
garding farm  mortgages  is  accurate.  There  were  in 
1910,  1,006,511  mortgaged  farms  in  the  United  States. 
The  total  amount  of  mortgaged  debt  on  these  farms 
was  $1,726,000,000.  Assuming  the  rate  of  return  on 
these  mortgages  to  have  been  6  per  cent,  (this  is 
minimum  rate  for  farm  mortgages),  the  total  property 
income  yielded  by  farm  mortgages  would  equal 
$100,000,000  annually.  The  total  public  debt  of 
$4,850,000,000  bears  interest  at  such  a  variety  of 
rates  that  no  accurate  estimate  of  the  property  in- 
come which  it  yields  is  possible.  Assuming  a  rate  of 
return  on  this  debt  of  4  per  cent. — a  low  rather  than 
a  high  estimate — the  public  debt  would  yield  an 
annual  property  income  of  about  two  hundred  millions. 
The  absence  of  facts  prevents  any  further  estimate  of 
the  property  income  paid  to  the  owners  of  various 
kinds  of  property  in  the  United  States. 

A  general  summary  of  property  income  payments 
shows  that  a  stupendous  sum  goes  annually  to  the 
owners  of  property  in  the  United  States.  If  to  the 
figures  published  by  the  Commissioner  of  Internal 
Revenue  are  added  estimates  for  non-corporate  busi- 
ness; the  rent  paid  by  householders  to  landlords;  the 
interest  paid  by  householders  to  mortgage  holders; 
the  rent  paid  by  farmers  to  landlords;  the  interest 
paid  by  farmers  to  mortgage  holders;  and  the  interest 
paid  by  public  authorities  to  the  holders  of  public 


152  INCOME 

bonds,  the  total  property  income  now  paid  in  the 
United  States  is  well  above  the  six-billion-dollar  mark. 

Even  the  cursory  reader  will  appreciate  the  fact 
that  the  estimates  for  property  income  paid  are  far 
from  including  all  property  income.  They  touch  only 
the  most  obvious  sources  of  property  income  pay- 
ments. 

Grant,  for  the  sake  of  argument,  that  the  annual 
income  paid  to  property  owners  in  the  United  States 
is  equal  to  six  billions  a  year.  There  are  probably 
ten  million  families  in  the  United  States  which  spend 
less  than  $500  a  year;  there  are  probably  twelve 
million  families  in  the  United  States,  which,  together, 
would  have  an  annual  expenditure  averaging  $500. 
The  six  billions  of  property  income  would  pay  all  of 
the  expenses  of  these  twelve  million  families,  or, 
added  to  their  incomes,  would  raise  them  to  a  level 
of  income  respectability. 

The  estimates  on  which  these  conclusions  are  based 
are,  in  every  case,  conservative  to  the  last  degree. 
The  truth  cannot  be  stated  in  figures,  because  the 
facts  for  accurate  statements  do  not  exist.  Figures 
are  used  in  order  to  make  the  matter  concrete  and 
real.  It  is  neither  practicable  nor  is  it  necessary  to 
fix  the  amount  of  property  income  paid  at  six,  five, 
or  seven  billions  annually.  The  significant,  vital  fact 
is  that  property  income  payments  are  being  made, 
and  that  these  payments  must  be  reckoned,  not  in 
hundreds  of  millions,  but  in  billions.  The  figures  for 
corporate  bonded  indebtedness  published  by  the 
Commissioner  of  Internal  Revenue,  alone  establish 
this  fact.  It  is  the  fact,  and  not  the  amount  that  is 
important. 


PROPERTY  INCOME  PAID  IN  UNITED  STATES  153 

The  truth  about  property  income  cannot  yet  be 
told.  No  one  knows  how  much  of  the  potential  in- 
come yielding  property  in  the  United  States  pays 
property  income.  No  one  knows  exactly  what  amount 
of  property  income  is  paid.  That  property  income 
is  paid,  and  in  vast  sums,  no  one  will  dispute. 

The  owners  of  income-yielding  property,  for  their 
bare  ownership,  are  able  to  take,  out  of  the  values 
produced  by  American  industry,  billions  of  dollars 
each  year.  They  are  not  questioned  as  to  the  means 
by  which  they  secured  their  property.  They  own,  and 
their  ownership  yields  them  income. 


CHAPTER  VII 

PROPERTY  INCOME  AND  THE  PRODUCERS  OF  WEALTH 

/.  The  Property-Service  Contrast 

THE  property-service  contrast  is  valid.  The  facts 
thus  far  adduced  have  done  nothing  if  they  have  not 
demonstrated  the  efficacy  of  the  contrast  between 
property  income,  on  the  one  hand,  and  service  income, 
on  the  other.  Theoretically,  the  old  division  of  income 
into  rent,  interest,  wages,  and  profits  is  indefensible 
when  applied  to  the  economic  conditions  now  prevail- 
ing in  the  United  States.  Practically,  such  a  division 
finds  no  counterpart  in  the  conduct  of  present-day 
business.  There  is  no  shadow  of  justification,  either 
in  theory  or  in  practice,  for  the  further  use  of  this 
outworn  terminology. 

The  division  of  total  income  into  service  income 
and  property  income  meets  every  demand  of  both 
theory  and  practice.  Theoretically,  there  is  a  clearly 
marked  line  of  distinction  between  that  income  which 
is  derived  from  the  rendering  of  services  and  that 
which  is  derived  from  the  ownership  of  property. 
Service  denotes  the  expenditure  of  energy.  Property 
ownership  bespeaks  a  legally  established  right.  Serv- 
ice and  ownership  are  two  essentially  different  con- 
cepts. Furthermore,  an  examination  of  the  various 
forms  of  income  (using  that  term  to  mean  a  flow  of 
purchasing  power)  fails  to  show  any  share  of  the  in- 
come fund  which  does  not  fall  within  this  classifica- 


PROPERTY  INCOME  AND   PRODUCERS   OF  WEALTH      155 

tion.  Modern  accounts  are  so  kept  that  the  sum  paid 
for  services  (compensation)  is  readily  distinguishable 
from  the  sums  paid  to  the  owners  of  property  (interest 
and  dividends).  The  substitution  of  the  corporate 
form  of  business  organization  for  the  one-man  business 
and  the  partnership,  has  resulted  in  the  virtual  elimi- 
nation of  every  form  of  income  save  these  two. 

//.  The  Importunity  of  the  Problem 

The  contrast  between  property  income  and  service 
income  corresponds  to  an  evident  line  of  cleavage 
that  is  becoming  more  manifest  with  each  passing 
decade.  Property  rights  are  being  heaped  skyward. 
The  growing  intelligence  of  the  unpropertied  masses 
leads  to  question,  to  protest,  to  revolt. 

Economic  issues  are  rapidly  shaping  themselves  in 
a  manner  calculated  to  draw  a  sharp  line  between  the 
recipients  of  service  income  and  of  property  income. 
Overnight,  in  the  world's  history,  the  American 
people  have  built  a  huge,  intricate,  industrial  machine, 
which  creates  pyramidal  masses  of  wealth.  A  part 
of  the  net  return  from  this  wealth  is  turned  back  to 
those  who  operate  the  machine,  while  another  part 
goes  to  those  who  own  it.  The  workers  and  the 
owners  are  contending  on  opposite  sides  and  with 
unabated  vigor  for  a  larger  share  of  the  wealth  which 
the  industrial  activities  of  the  community  produce. 

The  rapidity  with  which  the  system  of  income  dis- 
tribution now  in  vogue  in  the  United  States  has  leaped 
into  being,  taxes  the  imagination.  Three  centuries 
ago  there  was  practically  no  such  thing  as  property 
income  in  the  United  States.  Land  was  free;  capital 


156  INCOME 

was  meager.  There  was  no  price  on  the  land  save  a 
nominal  one,  and  the  tools  which  a  man  used  were  very 
frequently  the  product  of  his  own  handiwork.  Land 
values  and  capital  values  were  alike  inconsequential. 

The  basis  for  the  increase  in  property  incomes  lies 
first,  in  the  increasing  demand  for  land;  second,  in  the 
increased  amount  of  income-yielding  property.  Both 
factors  are  constantly  operating  in  a  growing,  progres- 
sive society. 

The  increase  of  land  values  is  inevitable  in  the 
United  States.  The  total  amount  of  land  is  limited. 
Each  increase  in  the  population  of  the  country  makes 
a  greater  demand  for  land.  Each  progressive  advance 
in  civilization  which  leads  to  new  uses  for  the  products 
of  land,  makes  a  greater  demand  for  land.  Step  by 
step,  the  people  of  the  United  States  are  moving  for- 
ward and  upward  along  the  path  of  developing  civiliza- 
tion. 

The  inexorable  character  of  this  increase  in  land 
values  becomes  more  evident  if  selected  areas  of  land 
are  considered.  The  facts  are  patent  in  the  case  of 
an  Illinois  farm,  which  sold  in  1880  for  $25.00  per 
acre,  and  1910  for  $250  per  acre.  The  farm  land 
(without  buildings)  of  Iowa  was  valued  at  $1,256,- 
751,980  in  1900,  and  at  $2,801,973,729  in  1910.  The 
land  on  which  Boston  stands  was  worth  $350,404,975 
in  1889,  and  $716,435,800  in  1913. 1  Greater  New 
York  reported  a  land  valuation  of  $3,367,233,746  in 
1906,  and  of  $4,602,852,107  in  1914. 2  The  choice 

1  "Annual  Report  of  the  Assessing  Department  for  the  Year 
1914,"  p.  18. 

2  "Report  of  Commissioner  of  Taxes  and  Assessments  in  the  City 
of  New  York,"  1914,  pp.  20-21. 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH       157 

portions  of  the  land  of  the  United  States  are  rising  in 
value.  Each  year  adds  to  the  power  which  their 
owners  have  over  community  earnings. 

The  second  basis  for  increasing  property  incomes 
lies  in  the  growing  value  of  income-yielding  property. 
The  value  of  property  in  the  United  States  is  growing 
much  more  rapidly  than  the  population.  During 
the  years  for  which  the  property  values  are  available, 
they  are  as  follows: 

TABLE  XIV. — INCREASE  IN  POPULATION  AND  IN  CERTAIN  FORMS  OF 

WEALTH.1     UNITED  STATES,  1850  TO  IQIO 


Value  of 

Railroad 

Manufac- 

All Farm 

Capitali- 

tures 3  Total 

Total 

Total  Wealth 

Property 

zation  2 

Capital 

Year 

Population 

(Thousands) 

(Thou- 

(Thou- 

(Thou- 

sands) 

sands) 

sands) 

1850 

23,191,876 

$    7,i35,78o 

$  3,967,000 

$    593,000 

$     833,245 

1860 

3i,443.32i 

16,159,616 

7,980,000 

2,000,000 

1,009,856 

1870 

38,558,371 

30,068,518 

8,945,000 

1,694,567 

1880 

50,155,783 

43,642,000 

12,181,000 

5402,038 

2,790,293 

1890 

62,947,714 

65,037,091 

16,082,000 

10,020,925 

6,525,051 

1900 

75,994,575 

88,517,307 

20,440,000 

11491,035 

9,813,834 

1904 

82,466,551 

107,104,212 

13,213,125 

12,675,581 

1910 

92,174,515 

40,991,000 

18,417,132 

18428,270 

This  comparison  of  the  increase  in  population  and 
in  property  values  leads  to  some  striking  conclusions. 
The  population  was  almost  exactly  four  times  as  large 
in  1910  as  it  was  in  1850.  During  the  same  six  dec- 

1  "Statistical  Abstract  of  the  United  States,"  1913. 

2  The  railroad  figures  for  1850  and  1860  are  estimates  taken  from 
"The  Development  of  Transportation  Systems  in  the  U.  S."    J.  L. 
Ringwalt,  ed.    Phila.,  1888,  pp.  124  and  184. 

3  The  figures  from  1850  to  1900  included  hand  and  neighborhood 
industries.    The  figures  for  1904  and  1910  include  factories  only. 


158  INCOME 

ades  wealth  increased  fifteen  times.  In  1850  the 
wealth  per  capita  was  $308.  In  1904  it  was  $1318. 
In  other  words,  the  per  capita  wealth  of  the  country 
was  four  times  as  great  in  1904  as  it  was  in  1850. 
This  is  not  the  same  thing  as  saying  that  property 
income  was  four  times  as  great,  but  the  facts  point 
in  that  direction.  Manufacturing  capital,  one  of  the 
most  distinctive  forms  of  income-yielding  property, 
is  thirty-five  times  as  great  in  1910  as  it  was  in 
1850.  Agricultural  values  have  risen  tenfold.  The 
increase  in  railroad  capital  amounts  to  threefold  in  the 
last  three  decades.  The  strides  of  applied  science,  the 
growth  of  population  and  the  increasing  wants  and 
demands  of  the  people  have  been  responsible  for  this 
up-rush  of  American  wealth. 

Another  factor  has  entered  to  accentuate  the  pay- 
ments of  property  income,  in  the  shape  of  a  rising 
interest  rate.  A  century  ago,  economists  predicted  a 
decrease  in  the  rate  of  interest.  Assuming  that  the 
increase  in  the  amount  of  capital  would  automatically 
lower  the  rate  of  interest  because  of  the  competition 
among  capitalists,  and  assuming  further,  a  large  in- 
crease in  capital,  they  looked  forward  to  a  time  when 
capital  must  go  begging.  Meanwhile  the  demand  for 
capital  has  steadily  increased,  and  so  great  has  been 
this  increase  in  demand,  that  even  under  a  stable  gov- 
ernment, with  the  risk  from  fortuitous  political  changes 
largely  eliminated,  the  rate  of  interest  has  tended 
upward.  Side  by  side  with  the  speedy  increase  in  the 
total  amount  of  wealth,  goes  an  increase,  during  recent 
years,  in  the  rate  of  return  which  property  owners 
expect  for  the  use  of  the  wealth. 

The  rapid  growth  of  property  values  has  accentu- 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH        159 

ated  and  emphasized  the  contrast  between  service 
and  property  income.  Since  the  distinction  between 
services  rendered  and  property  owned  is  so  evident, 
more  and  more  attention  will,  of  necessity,  center  on 
the  relative  position  of  those  who  render  services  and 
those  who  own  property. 

Broadly  speaking, — and  all  of  the  conclusions  based 
on  such  data  as  are  available,  must  be  written  in  the 
broadest  terms,  with  the  full  realization  of  the  many 
exceptions  that  exist, — there  are  four  characteris- 
tic features  of  the  shares  of  income  which  are  derived 
from  the  ownership  of  property.  First,  property 
income  enjoys  priority  in  its  claims  upon  the  proceeds 
of  industry.  Second,  the  vicissitudes  of  industry 
affect  property  income  less  sharply  than  they  affect 
service  income.  Third,  income-yielding  property  is 
relatively  permanent.  Fourth,  income-yielding  prop- 
erty exhibits  a  tendency  to  concentrate  in  the  hands 
of  a  small  fraction  of  the  people.  The  total  effect  of 
these  characteristics  of  property  income  is  stupendous. 
The  priority,  regularity,  permanence,  and  concentra- 
bility  of  property  income  combine  to  place  the  owners 
of  modern  income-yielding  property  in  a  position  of 
economic  security  that  surpasses  the  fondest  dreams 
of  past  ages. 

///.  The  Priority  of  Property  Income 

Those  who  are  giving  their  time  and  energy  to  the 
production  of  wealth,  face  the  fact  that  property 
rights  have  been  so  construed  as  to  give  property 
owners  a  first  claim  on  production  and  to  make  prop- 
erty income  a  fixed  charge  on  the  industry  of  the  com- 


l6o  INCOME 

munity.  This  priority  of  claim  has  played  a  leading 
part  in  raising  property  to  a  position  of  supremacy  in 
the  economic  world. 

The  risks  of  industry,  the  burdens  of  economic  un- 
certainty, and  the  losses  incident  to  the  dislocations 
of  the  industrial  system  are  carried  in  the  first  instance 
by  labor.  The  first  appearance  of  hard  times  is  fol- 
lowed by  a  decrease  in  the  working  force.  The  least 
curtailment  in  orders,  leads  to  part-time  work.  Wage 
rates  are  not  cut — that  method  is  crude  and  disas- 
trous— but  men  and  women  are  laid  off  temporarily 
or  permanently.  Bonds  still  draw  their  interest;  the 
dividends  are  paid  on  stocks;  and  labor  waits  for  a  job. 
The  defender  of  property  income  will  say  at  once — 
"If  there  is  nothing  to  do,  why  pay  labor?"  The 
counter  question  is  obvious.  "If  there  is  nothing  to 
do,  why  pay  capital?"  "Ah,"  respond  the  propertied 
interests,  "you  can  get  rid  of  the  laborer  by  firing 
him,  but  the  investment  still  stands."  That  answer 
carries  the  essential  distinction  in  priority  between 
the  position  of  the  property  owner  and  of  the  worker. 
Mines,  railroads,  factories,  and  machinery,  cannot 
be  laid  off.  Through  good  times  and  bad  they  are 
a  fixed  charge,  unless  the  business  wishes  to  face 
bankruptcy  proceedings.  The  most  important  obliga- 
tion of  a  modern  business  is  the  interest  on  its  bonded 
debt.  Wages  and  salaries  may  stop,  but  interest  on 
bonds  must  continue  if  the  business  is  to  remain  sol- 
vent. 

Interest  has  always  been  looked  upon  as  a  fixed 
charge.  Modern  business  is  going  farther  and  placing 
dividends  on  the  same  basis.  Huge  surpluses  are 
used  to  keep  dividends  intact.  Meanwhile,  labor  is 


PROPERTY  INCOME  AND  PRODUCERS   OF   WEALTH      l6l 

employed  when  times  are  good,  and  dismissed  when 
times  are  bad. 

Through  the  evolution  of  the  industrial  system, 
property  income  has  become  a  first  charge  on  industry. 
Instead  of  being  the  residual  claimant,  instead  of 
taking  what  is  left  after  other  charges  are  paid,  prop- 
erty rights  have  fastened  themselves  upon  industry 
to  such  an  extent  that  the  owner  of  capital,  like  the 
owner  of  land,  can  demand  and  obtain  a  royalty 
(interest  charge)  which  must  be  paid  before  any  other 
claimant  to  income  is  satisfied. 

Thus  landowners,  the  owners  of  bonds  and  mort- 
gages, and  in  late  years,  the  owners  of  stocks  as  well, 
have  saddled  their  property  ownership  claims  on 
society.  They  are  possessed  of  the  vitals  of  present- 
day  economic  life.  Armed  with  title  deeds  to  natural 
resources  and  to  machinery  alike,  they  are  in  a  posi- 
tion to  dictate  terms  to  the  remainder  of  mankind. 
Before  a  tree  can  be  cut  or  a  ton  of  coal  mined;  before 
a  wheel  can  turn  or  a  locomotive  speed  along  the  steel 
pathway;  before  a  wage-earner  can  raise  a  hand  to 
labor  for  himself  and  his  family,  the  property  owners 
must  be  assured  that  they  will  receive  a  specified 
and  assured  rate  of  return  on  their  holdings. 

Society,  for  the  use  of  the  earth  which  was  here 
before  our  forefathers  came,  and  for  the  use  of  the 
machinery  of  production  which  the  people  of  America 
have  spent  three  centuries  in  building,  must  pay  a 
royalty,  or  tax,  to  the  owners  of  land  and  of  machinery. 
The  method  by  which  the  owners  came  into  possession 
is  scarcely  brought  into  question.  As  owners,  they 
are  entitled  to  the  first  fruits. 

The  owners  of  modern  income-yielding  property 


l62  INCOME 

demand  the  first  fruits  of  industrial  activity.  Even 
though  they  render  no  service  to  society,  as  owners 
they  lay  claim  to  a  prior  right  to  the  values  created 
in  American  industry. 

IV.  The  Stability  of  Property  Income 

The  priority  of  property  income  goes  hand  in  hand 
with  its  superior  stability.  Each  bulwarks  the  other. 

The  social  forces  of  the  nineteenth  century  con- 
spired together  to  stabilize  property  income.  With 
the  rise  of  great  funds  of  private  property,  and  the 
development  of  a  philosophy  which  gave  property  a 
first  claim  on  the  proceeds  of  industrial  activity,  peo- 
ple have  taken  it  for  granted  that  a  man  should  live 
on  his  income.  Everywhere,  men  and  women  are 
seeking  an  opportunity  to  retire  from  active  life  and 
spend  the  last  years  in  ease  and  satisfaction.  The 
"last  years"  may  be  from  seventy  to  the  end,  or 
from  forty-five  to  the  end.  The  attitude  of  the  in- 
dividual is,  in  both  cases,  the  same.  The  farmer, 
renting  his  place  and  moving  into  the  village,  where 
he  "takes  life  easy"  and  the  broker,  retiring  to  his 
estate  in  the  early  fifties,  are  in  a  class.  Both  are  in 
secure  possession  of  property  which  yields  a  living 
income.  Both  are  convinced  that  to  live  on  this 
income  is  their  right.  Both  rest  secure  in  the  belief 
that  they  have  the  most  stable  form  of  livelihood  that 
modern  life  affords. 

Even  the  head  of  a  well-managed  corporation  is  far 
less  secure  in  his  income,  than  is  the  bondholder  or 
the  stockholder.  For  the  underlings,  income  is  un- 
certain, depending,  as  does  the  wage  and  salary  of 


PROPERTY  INCOME  AND   PRODUCERS   OF  WEALTH      163 

every  man  in  the  company's  employ,  upon  many 
circumstances  over  which  he  can  have  no  control. 

The  point  is  well  illustrated  by  an  analysis  of  the 
way  in  which  periods  of  prosperity  and  of  adversity 
affect  the  sharers  of  income.  First,  take  railroad 
earnings.  During  a  good  year  a  regular  rate,  say  5 
per  cent.,  is  paid  on  the  bonds.  The  earnings  being 
high,  a  dividend  of  8  per  cent,  is  paid  on  the  stock. 
The  general  run  of  wages  and  salaries  remains  the 
same,  although  they  are  increased  in  a  few  depart- 
ments. A  bad  year  ensues.  The  interest  on  the 
bonds  is  paid  at  the  same  rate  as  in  a  good  year. 
Earnings  are  low,  therefore  the  dividends  on  the  stock 
are  cut  from  8  to  6  per  cent.  There  are  less  freight 
and  fewer  passengers  to  carry.  No  new  construction 
work  is  undertaken;  therefore,  a  quarter  of  the  rail- 
road employees  are  dropped  from  the  pay  rolls.  No 
reduction  is  made  in  wages;  the  wage  earner  is  simply 
denied  the  opportunity  to  earn  a  living.  Interest 
must  continue,  else  bankruptcy  ensues.  Dividends 
may  be,  and  frequently  are,  cut  or  passed.  Earnings 
for  a  considerable  proportion  of  the  employees  stop 
absolutely.  In  other  industries,  such  as  textile  manu- 
facturing and  coal  mining,  instead  of  dismissing  em- 
ployees, the  establishment  is  worked  two  or  three,  or 
perhaps  four,  days  a  week,  during  bad  times.  The 
interest  on  the  bonds  is,  of  course,  paid.  Dividends 
on  the  stock  may  be  passed  or  paid  out  of  surplus. 
Wages  are  decreased  by  the  simple  methods  of  part- 
time  work.  In  short,  the  incorporation  of  industry, 
involving  the  issue  of  stocks  and  bonds,  creates  a 
situation  in  which,  during  periods  of  prosperity,  the 
chief  advantage  is  derived  by  the  stockholders;  in 


164  INCOME 

periods  of  adversity,  the  chief  burden  is  borne  by  the 
employees;  and  year  in  and  year  out,  through  ad- 
versity and  prosperity  alike,  interest  is  paid  to  bond- 
holders. Exactly  the  same  thing  is  true  of  the  rent  of 
land.  In  good  years  and  bad  years  the  tenants  must 
pay  the  same  amount.  Certain  forms  of  property 
income  thus  continue  inviolate,  while  service  income 
and  the  opportunity  to  earn  income  are  dependent 
on  the  caprice  of  industry. 

The  bonds  of  an  industrial  enterprise  are  looked 
upon  as  the  stable  form  of  security.  The  development 
of  law  and  of  public  opinion  has  rendered  them  iron- 
clad. The  United  States  Commissioner  of  Internal 
Revenue  reports,  for  the  corporations  coming  under 
his  purview  in  1913,  bonded  indebtedness  of  $34,749,- 
516,354.  Here  is  a  fund,  which  will  yield  at  5  per  cent, 
a  billion  and  three-quarters  of  property  income  an- 
nually. 

The  same  security  which  now  surrounds  bonds,  is 
being  gradually  thrown  around  stock  issues.  In  days 
gone  by,  stock  issues  were  not  taken  seriously.  To-day, 
the  right  to  pay  a  six  per  cent,  return  in  stock — even 
if  the  issue  did  not  originally  represent  value  invested 
— is  being  recognized  in  court  decisions,  in  the  deci- 
sions of  railroad  commissions,  and  in  the  attitude  of 
industry  toward  income.  Thus  there  has  been  ef- 
fected a  reversal  in  the  relation  between  property 
claims  and  the  claims  of  labor.  Time  was  when  prop- 
erty shouldered  the  give  and  take — the  profits  of  in- 
dustry. If  there  was  a  lean  year,  profits  were  small. 
They  were  larger  in  fat  years.  The  man  invested  his 
money,  took  the  risk  involved,  and  was  paid  for  it. 

At  present,  labor  shoulders  the  give  and  take  of 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      165 

prosperous  and  adverse  years.  When  times  are  bad, 
men  are  laid  off.  Orders  decrease,  and  part-time 
work  automatically  ensues.  Meanwhile  the  snipping 
of  coupons  sounds  at  regular,  unvaried  intervals,  and 
the  book  in  which  dividend  checks  are  drawn  is  busy 
four  times  each  year. 

The  man  who  decides  to  retire  from  active  life, 
and  live  on  his  income,  has  chosen  the  safest  course 
that  any  man  in  the  modern  world  may  pursue.  The 
system  of  property  income  payment  has  been  refined 
until  it  is  almost  automatic  in  its  insistent  regularity. 

V.  The  Permanence  of  Property  Income 

The  priority  of  the  property  income  claims  in  the 
business  world,  and  the  many  safeguards  which  have 
been  thrown  about  property  rights  in  order  to  insure 
their  stability  have  given  to  property  income  a  rela- 
tively great  permanence.  The  attainment  of  this  end 
has  been  hastened  by  the  widespread  respect  for 
property  rights. 

The  permanence  of  property  income  is  based,  in  the 
first  instance,  on  the  intimate  connection  which  exists 
between  property  values  and  land  values.  As  indus- 
try develops,  less  and  less  of  the  property  in  the  world 
exists  in  terms  of  natural  resources.  At  the  same 
time,  there  is  no  escape  from  the  fact  that  all  property 
is  derived  originally  from  the  land,  and  that  the  great 
stable  property  values  are  still  land  values. 

The  land  values,  in  a  growing  community  like  the 
United  States,  tend  constantly  to  increase.  Each 
step  in  progress,  by  raising  land  values,  gives  greater 
permanence  to  property  values  generally.  The  eco- 


I 66  INCOME 

nomic  movements  incident  to  national  development 
result  automatically  in  the  increased  permanence  of 
property  income. 

The  advent  of  the  corporation  gave  an  ideal  foot- 
hold for  the  property  interests.  Corporate  values, 
published  and  divided  into  shares,  acquired  a  per- 
manence which  the  individual  business  could  never 
have  held.  The  perpetual  life  of  the  corporation,  the 
possibility  of  drawing  into  its  organization  a  great 
body  of  investors,  the  increase  in  the  size,  and  there- 
fore in  the  relative  importance  of  the  corporate  busi- 
ness, all  tended  to  make  corporate  property  values 
permanent. 

The  movement  toward  the  permanence  of  property 
values  has  been  universally  furthered  by  the  granting 
of  numerous,  long-term  franchises.  That  whole  body 
of  business,  classed  as  public  utilities,1  are  operated 
under  special  grants  and  special  licenses  which  have 
done  as  much  as  any  other  single  thing  to  immortalize 
property  investments.  The  franchise  has  really  be- 
come a  public  guarantee  of  the  permanence  of  prop- 
erty values. 

Other  forms  of  special  privilege  have  had  a  like 
influence  in  making  property  values  permanent. 
Copyrights,  and  patents,  freely  used  by  large  in- 
terests, have  been  employed  to  place  in  the  hands  of 
the  property  owners  a  sure  source  of  income  per- 
manence. 

Modern  business  practice  has  wielded  an  immense 
influence  in  the  direction  of  property  permanence. 

1  The  United  States  Commissioner  of  Internal  Revenue  reports 
the  total  values  of  the  Public  Utilities  bonds  as  $20,817,000,000,  and 
of  the  stocks  as  $19,584,000,000.  ("Annual  Report  for  1913,"  p.  93.) 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH   167 

A  thousand  dollars,  once  invested,  is  virtually  im- 
mortal, unless  it  is  stolen,  or  disposed  of  in  some 
extra-legal  way.  Depreciation,  amortization,  insur- 
ance, and  special  surplus-fund  charges  throw  around 
income-earning  property,  a  large  guarantee  of  safety. 
Any  failure  in  the  perpetuity  of  the  property  values 
is  due  to  inadvertence  or  impotence  in  the  property 
interests.  For  centuries,  the  thought  and  effort  of 
the  business  world  have  been  directed  toward  the 
increasing  permanence  of  property  rights. 

The  efforts  of  the  propertied  interests  have  been 
exerted  to  good  purpose.  The  public  mind,  the  laws 
and  constitutions,  the  forms  of  judicial  practice — in 
short,  all  of  the  social  forces  that  were  of  advantage 
have  been  bent  to  the  guarantee  of  property  income 
permanence. 

Granted  the  continuance  of  the  present  system  of 
property,  the  student  trembles  to  think  of  the  task 
in  store  for  the  toiler  of  the  future.  Each  year,  be- 
side producing  wealth  in  sufficient  quantities  to  pro- 
vide for  himself  and  his  family,  he  must  devote  a 
large  portion  of  his  energies  to  the  provision  of  income 
for  the  owners  of  a  vast,  and  ever  growing  body  of 
immortalized  property  rights  and  interests. 

Men  look  with  pretended  aversion  toward  the 
Feudal  System — an  organization  of  society  under 
which  the  nobility  and  the  priestcraft,  through  the 
control  of  the  natural  resources  (agricultural  land) 
were  able  to  live  upon  the  efforts  of  the  great  mass 
of  the  people.  It  is  time  to  turn  from  the  perspective 
of  history  to  the  realities  of  the  present-day  economic 
organizations.  Here,  in  the  twentieth  century  civiliza- 
tion of  the  Western  World  is  an  economic  system 


1 68  INCOME 

which  automatically  turns  into  the  coffers  of  those 
who  control  the  natural  resources  (forests,  ore,  coal, 
fertile  land)  an  endless  stream  of  wealth.  As  rent 
ate  up  the  fruits  of  a  man's  energy  under  feudalism, 
interest  and  dividends  do  likewise  under  the  modern 
system  of  industrialism,  which  has  given  to  income- 
yielding  property  a  permanence  that  rivals  that  of 
the  estate  held  by  the  mediaeval  landlord. 

VI.  The  Tendency  of  Property  Income  to  Concentrate 

There  is  one  further  feature  of  the  property-income 
situation  which  cannot  be  dismissed  without  a  word 
of  comment — that  is  the  tendency  of  property  income 
to  concentrate  in  the  hands  of  a  small  group  of  the 
population.  The  tendency  is  revealed  by  the  record 
of  wealth  distribution  in  every  society  about  which 
history  contains  a  page.  It  is  present,  no  one  can  say 
with  what  momentum,  in  the  United  States  to-day. 

The  present  system  of  property  ownership  places 
no  limitation  on  the  amount  of  income-yielding  prop- 
erty which  one  individual  may  control.  The  Rocke- 
fellers, Guggenheims,  and  Carnegies  may  secure  title 
to  an  estate  of  a  hundred-thousand,  a  hundred- 
million,  or  a  hundred-billion.  There  is  nothing  in  the 
custom  or  law  of  the  land  to  check  such  a  procedure, 
and  in  the  course  of  the  undertaking  business  practice 
affords  every  conceivable  advantage.  The  modern 
property-owning  world  is  organized  on  the  assumption 
that  every  man  has  a  right  to  as  much  property  as  he 
can  get.  Under  the  circumstances,  it  is  not  strange 
that  there  has  been  a  very  considerable  concentration 
of  property  ownership  in  a  comparatively  few  hands. 

The  rapidity  with  which  large  fortunes  have  been 


PROPERTY  INCOME  AND   PRODUCERS   OF  WEALTH      169 

acquired  is  one  of  the  wonders  of  the  modern  world. 
At  the  present  time,  the  United  States  numbers  its 
millionaires  by  thousands.  The  mere  mention  of 
such  names  as  Vanderbilt,  Gould,  Astor,  Rockefeller, 
Morgan,  Havemeyer,  Belmont,  Whitney,  Goelet,  Car- 
negie, Armour,  Harriman,  and  Dupont  (all  of  them 
families  numbered  among  the  multi-millionaires  whose 
wealth  was  acquired,  for  the  most  part,  since  the  Civil 
War),  calls  to  mind  the  immense  concentration  of 
income-yielding  property  which  has  been  going  on 
within  the  past  half  century.  The  industrial  system  is 
intertwined  with  a  device  known  as  private  property 
in  income-yielding  wealth,  which  leads  inevitably  to 
the  concentration  of  property  income  in  the  hands  of  a 
comparatively  small  portion  of  the  population. 

There  have  been  many  attempts — none  of  them 
satisfactory — to  measure  the  distribution  of  wealth 
in  the  United  States  in  such  a  way  as  to  show  its  exact 
concentration.  The  most  widely  quoted  of  these 
efforts,  that  of  Charles  B.  Spahr,  led  to  the  conclu- 
sion that  of  the  12,500,000  families  in  the  United 
States  in  1890,  11,000,000  owned  less  than  $5,000 
worth  of  property.  The  aggregate  wealth  of  these 
families,  Spahr  estimated  at  nine  billions.  Among  the 
remaining  families,  1,375,000  were  credited  with  prop- 
erty varying  from  $5,000  to  $50,000,  and  aggregating 
twenty-three  billions.  The  last  125,000  families  had 
property  exceeding  $50,000,  but  the  aggregate  of 
this  property  was  thirty-three  billions  * — an  amount 
equal  to  the  total  property  held  by  the  other  12,375,000 
families. 

1  "Present  Distribution  of  Wealth  in  the  United  States,"  Charles 
B.  Spahr.  New  York,  1896,  p.  66. 


170  INCOME 

The  figures  cited  by  Spahr  are  estimates  based  upon 
an  intensive  study  made  in  a  restricted  section  of  the 
country.  Roughly,  they  correspond  with  later  work 
done  by  Spahr,  and  with  the  income  returns  for  Eng- 
land and  Prussia.  As  a  practical  working  basis  they 
are  valueless;  as  a  suggestion  of  the  extent  to  which 
wealth  has  been  concentrated,  they  lend  additional 
color  to  the  general  belief  that  the  major  portion  of 
property-income  returns  are  handed  over  to  a  com- 
paratively small  group  of  the  population. 

The  exact  figures  showing  the  concentration  of 
property  values  are  unobtainable,  and  of  no  great 
moment  in  the  present  discussion.  The  tendency  of 
income-yielding  property  to  concentrate  in  a  relatively 
small  number  of  hands  is  evident  on  every  side.  The 
extent  of  the  concentration  cannot  be  ascertained 
with  accuracy. 

VII.  The  Position  of  the  Producers 

The  position  of  the  recipients  of  property  income  is 
relatively  secure.  Their  claims  enjoy  priority,  sta- 
bility, and  permanency.  Their  property  tends  to  at- 
tract other  property,  thereby  augmenting  the  incomes 
of  individual  property  owners.  What  can  be  said 
for  those  who  render  the  services  upon  which  the  in- 
dustrial system  so  largely  depends? 

Those  who  render  services,  by  engaging  in  produc- 
tive activity,  make  up  the  human  element  in  the  in- 
dustrial mechanism.  They  supply  the  energy — the 
distinctively  human  contribution.  Their  hands,  legs, 
backs,  nerves,  and  muscles;  their  physical  and  intel- 
lectual powers,  are  devoted  to  the  creation  of  the 


PROPERTY  INCOME  AND  PRODUCERS   OF  WEALTH      17 1 

things  that  the  world  needs  and  uses.  From  laborer 
to  director;  from  mechanic  to  engineer;  from  clerk 
to  manager,  the  men  and  women  engaged  in  rendering 
services,  devote  themselves  to  the  production  of 
economic  goods. 

Those  who  render  services  give  the  best  of  their 
energy  and  the  major  portion  of  their  free  time  to 
the  tasks  which  they  perform.  Even  in  the  industries 
where  the  working  day  has  been  reduced  to  eight 
hours,  if  the  time  necessary  to  get  to  and  from  work 
is  taken  into  consideration,  the  man  or  woman,  work- 
ing at  a  steady  position,  has,  after  the  deduction  of 
nine  or  nine  and  a  half  hours  for  time  at  work,  time 
used  in  going  to  and  coming  from  work,  and  lunch 
time,  not  more  than  fifteen  hours  for  eating,  sleeping, 
and  the  other  necessary  routine  of  life.  If  eleven 
hours  are  allowed  for  this  routine,  there  remain  four 
free  hours  in  each  working  day.  The  eight-hour  day 
is  still  the  exception  rather  than  the  rule.  There  are 
many  industries  where  the  working  day  is  eleven  and 
a  few  in  which  it  is  twelve  hours.  For  such  industries, 
the  free  time  in  a  working  day  practically  vanishes. 

A  great  portion  of  these  rendering  services  literally 
devote  their  adult  lives  to  labor.  As  individuals,  they 
are  submeregd  in  the  services  which  they  render  in 
exchange  for  their  daily  bread. 

Over  against  the  priority,  stability,  permanence, 
and  contentrability  of  property  income,  the  student 
of  income  facts  is  compelled  to  set  the  paucity,  the 
social  inadequacy,  the  economic  inadequacy,  the 
rigidity,  and  the  frightful  instability  of  service  income. 
The  contrast,  squarely  made  between  the  relative 
position  of  those  who  receive  property  income  and 


172  INCOME 

those  who  receive  service  income,  is  startling  in  its 
vividness.  The  position  of  the  great  body  of  those 
who  render  services  is  immeasurably  less  secure  than 
the  position  of  the  great  body  of  those  who  live  upon 
property  income. 

VIII.  The  Paucity  of  Service  Income 

The  actual  amounts  paid  to  the  men  and  women 
who  do  the  work  of  the  industrial  world,  are  extremely 
small.  Current  wage  rates  placed  side  by  side  with 
the  expense  accounts  of  thousands  of  families  whose 
sole  claim  to  income  rests  upon  their  ownership  of 
property  are  startling  in  their  paucity.  Five  hundred 
dollars  paid  to  an  able-bodied  man  whose  back  was 
bent  three  hundred  days  of  the  year  in  his  efforts  to 
support  a  wife  and  four  small  children;  seven  dollars  a 
week  to  the  anaemic  man  whose  eye  races,  with  his 
machine,  along  the  seams  of  ladies'  coats;  fifteen  dol- 
lars a  week  to  a  mechanic,  keeping  a  family  in  a  big 
city;  a  thousand  dollars  a  year  to  a  skilled  artisan — 
these  wage  rates,  reviewed  in  detail  in  Chapter  IV, 
make  the  hastiest  pause  to  consider.  They  are  in- 
significant when  contrasted  with  the  returns  to  the 
families  which  own  the  valuable  property  of  the  coun- 
try. 

Each  year,  enormous  payments  are  being  made  to 
the  owners  of  property  in  the  United  States  in  return 
for  their  bare  ownership.  At  the  same  time,  the 
workers,  whose  efforts  are  responsible  for  bringing 
these  values  into  being,  receive  in  many  cases,  returns 
which  sound  like  mere  pittances. 

More  than  nine-tenths  of  those  who  are  at  work  in 


PROPERTY  INCOME  AND  PRODUCERS   OF  WEALTH      173 

organized  industry  are  clerks  or  wage-earners.  Among 
male  clerks  and  wage-earners,  an  annual  return  of 
$1,000  is  exceptional,  while  $1,500  is  almost  unique. 
Almost  the  entire  male  wage-earning  population  re- 
ceives less  than  $1,500  per  year;  most  of  it  receives  less 
than  $1,000;  and  nearly  half  of  it  falls  under  $600. 
The  incomes  of  women  fall  far  below  those  of  men. 
At  the  same  time,  the  owners  of  property  receive  an 
annual  income  of  many  billions.  The  facts  adduced 
in  the  present  investigation  tend  to  show  more  than  six 
billions  of  property  income — a  sum  sufficient  to  sup- 
port the  12  million  poorest  families  in  the  United 
States  on  their  present  level  of  existence,  or  to  add 
$300  per  year  to  the  income  of  every  family  in  the 
United  States.  The  amount  now  paid  in  property 
income,  distributed  among  the  producers,  would 
probably  raise  every  family  income  in  the  United 
States  to  a  level  of  decency  or  efficiency. 

IX.  The  Social  Insufficiency  of  Service  Income 

There  are  two  ways  in  which  the  sufficiency  of  serv- 
ice income  may  be  judged.  On  the  one  hand,  the 
question  may  be  asked — "Is  the  service  income  ade- 
quate to  provide,  for  those  dependent  upon  it,  a 
decent  living — that  is,  a  living  that  is  considered 
adequate  in  a  given  community  and  under  given 
circumstances?"  There  is  another  question  of  equal 
significance — "Will  the  service  income  enable  the  re- 
cipient to  pay  his  running  expenses  and  to  look  out  for 
the  future  in  terms  of  up-to-date  business  practice?" 
Although  one  of  these  questions  relates  primarily 
to  the  family  or  social  side  of  life  and  the  other  to  the 


174  INCOME 

business  or  economic  side  of  life,  neither  can  be  ig- 
nored in  a  consideration  of  the  sufficiency  of  service 
income. 

Looking  at  the  matter  from  the  standpoint  of  the 
consumer,  the  important  question  regarding  a  given 
income  may  be  stated  in  the  terms — "What  will  it 
buy?"  For  the  purposes  of  the  present  discussion, 
it  is  necessary  to  go  back  one  step,  and  to  ask — "What 
is  it  expected  to  buy?  " 

Perhaps  the  greatest  single  question  that  arises  in 
connection  with  service  income,  relates  to  the  ade- 
quacy of  service  income  to  provide  a  decent  living  for 
the  family  of  the  man  rendering  services.  At  the  pres- 
ent time,  in  the  United  States,  the  incomes  paid  to  a 
considerable  portion  of  the  adult  males  rendering 
services,  are  insufficient  to  insure  decent  family  living. 

Two  distinct  problems  present  themselves  in  a 
consideration  of  living  standards.  There  is  first  the 
problem  of  bare  subsistence;  second,  the  problem  of 
a  "normal,"  "decent"  or  "fair"  standard  of  living. 
The  problem  of  a  normal  or  fair  standard  of  living  is 
an  essentially  different  one  from  the  problem  of  a 
minimum  or  subsistence  standard.  In  contrasting 
the  minimum  standard  and  the  fair  standard,  the 
author  of  a  recent  Federal  report  states — "The  mini- 
mum standard  is  a  standard  of  living  so  low  that  one 
would  expect  few  families  to  live  on  it.  It  will  be  con- 
ceded that  a  standard  of  living  upon  which  people  are 
to  live  must  include  many  things  that  are  not  allowed 
by  the  minimum  standard.  It  must  be  a  standard 
that  provides  not  only  for  physical  efficiency  but 
allows  for  the  development  and  satisfaction  of  human 
attributes.  Just  what  is  to  be  included  in  such  a 


PROPERTY  INCOME  AND  PRODUCERS  OF   WEALTH      175 

standard  depends  upon  the  people  to  whom  it  is  ap- 
plicable. Manifestly,  a  standard  that  would  be  con- 
sidered fair  by  a  laboring  man  would  not  appear  fair 
to  a  financier.  Those  possessing  different  degrees  of 
wealth  have  come  to  look  upon  different  things  as 
essential  to  their  manner  of  life."  1  A  minimum  stand- 
ard will  keep  body  and  soul  together.  A  fair  standard 
will  maintain  the  health  and  efficiency  of  a  family, 
and  insure  it  against  physical  deterioration,  poverty 
and  misery. 

The  items  entering  into  a  minimum  and  a  fair 
standard  of  living  have  been  worked  out  in  consider- 
able detail,2  and  their  cost  estimated  for  different 
cities.  Most  of  the  studies  have  aimed  to  ascertain 
the  cost  of  a  fair  standard  of  living  for  a  family  of 
five — a  man,  wife,  and  three  children  under  four- 
teen. 

The  Chapin  study,  made  for  the  avowed  purpose 
of  determining  the  cost  of  a  fair  standard,  is  thus 
summarized — "An  income  of  $900  or  over  probably 
permits  the  maintenance  of  a  normal  standard,  at 
least  so  far  as  the  physical  man  is  concerned."  Re- 
garding incomes  below  $900,  Dr.  Chapin  makes  the 
following  statement — "Whether  an  income  between 
$800  and  $900  can  be  made  to  suffice  is  a  question 

1  "Woman  and  Child  Wage-Earners  in  the  United  States,"  Senate 
Doc.  No.  645,  6ist  Congress,  2d  Session.     Washington,  Government 
Printing  Office,  1911,  Vol.  XVI,  p.  142. 

2  "Woman  and  Child  Wage-Earners,"  op.  tit.;  "The  Standard  of 
Living  Among  Workingmen's  Families  in  New  York  City,"  R.  C. 
Chapin,  New  York,  Charities  Publication  Committee,  1909,  p.  245; 
"Wages  and  Family  Budgets  in  the  Chicago  Stock  Yards  District," 
J.  C.  Kennedy  and  others,  University  of  Chicago  Press,  1914;  and 
"Financing  the  Wage  Earner's  Family,"  op,  tit.,  Chapter  2. 


176  INCOME 

to  which  our  data  do  not  warrant  a  dogmatic  an- 


swer. 


»  i 


One  other  less  complete,  but  highly  satisfactory 
study  has  been  made  of  standards  of  living  in  the 
Stock  Yards  District  of  Chicago.  After  an  exhaustive 
investigation  of  which  a  rather  complete  analysis 
appears  in  published  form,  the  investigators  report 
that  the  minimum  amount  necessary  to  support  a 
family  of  five  efficiently  in  the  Stock  Yards  District 
is  $800  per  year.2 

There  have  been  several  other  investigations  and 
estimates,  less  complete  and  less  conclusive,  which 
lead  to  the  same  general  conclusion,  namely — that 
where  such  investigations  have  been  made  in  the  in- 
dustrial cities  of  the  northeastern  United  States,  the 
cost  of  a  decent  standard  of  living  for  a  family  con- 
sisting of  a  man,  wife  and  three  young  children, 
varies  from  $750  to  $1000. 

A  comparison  between  these  amounts  which  are 
apparently  necessary  to  provide  the  necessaries  and 
the  decencies  of  life,  and  the  wages  paid  to  adult 
males,  leads  inevitably  to  the  conclusion  that,  at 
the  present  rates  of  service  income,  a  considerable 
number  of  wage-earners  are  unable  to  give  their 
families  even  the  necessaries,  not  to  speak  of  the 
decencies  of  life.  Many  radical  readjustments  must 
be  effected  before  the  service  incomes  now  paid  to 
large  numbers  of  workers,  bear  the  marks  of  social 
adequacy. 

1  "The  Standards  of  Living  Among  Workingmen's  Families  in 
New  York  City,  op.  cit.,  p.  246. 

2  "Wages  and  Family  Budgets  in  the  Chicago  Stock  Yards  Dis- 
trict," op,  cit.,  p.  80. 


PROPERTY    INCOME  AND  PRODUCERS  OF  WEALTH      177 

X.  The  Economic  Inadequacy  of  Service  Income 

The  question  regarding  the  adequacy  of  service  in- 
come to  provide  a  decent  living  has  a  counterpart  in  the 
question  regarding  its  adequacy  to  cover  the  needs  gen- 
erally accepted  by  modern  business  practice.  The  first 
question  relates  to  the  worker  as  a  consumer,  and  a 
member  of  a  family;  the  second  relates  to  him  as  a  pro- 
ducer and  an  efficient  factor  in  the  industrial  system. 

Cease  for  a  moment  to  think  of  the  worker  as  a 
human  being,  vitalized  in  terms  of  individual  impulse 
and  social  association,  and  look  upon  him  as  a  part 
of  the  mechanism  which  produces  a  livelihood  for 
mankind.  Whether  the  worker  is  compared  to  an 
individual  machine,  like  a  loom,  delivery  wagon, 
office  desk;  or  to  an  individual  plant  like  a  cotton 
mill,  retail  store,  steel  plant,  the  economic  significance 
of  the  matter  is  the  same. 

Business  accounting  has  been  reduced  to  a  rather 
definite  form.  The  detail  of  practice  varies  from  one 
industry  to  another.  In  general  terms,  however,  the 
following  formula  holds: 

1.  The  total  returns  from  receipts,  sales,  or  earn- 
ings are  called  "gross  receipts." 

2.  From  gross  receipts,  the  accountant  deducts  the 
operating   expenses,   or  up-keep   charges — raw  ma- 
terials, wages,  and  the  like.    Under  this  head  fall  the 
ordinary  expenses  of  carrying  on  the  business.    The 
remainder  is  net  earnings. 

3.  Gross  income  is  the  sum  of  net  earnings  and  inci- 
dental income.    From  gross  income,  interest,  deprecia- 
tion, taxes,  and  interest  are  subtracted,  leaving  net 
income. 


178  INCOME 

4.  Net  income,  minus  dividends  and  special  ap- 
propriations, equals  surplus,  or  unapportioned  income. 

The  statement  may  appear  involved  to  the  unini- 
tiated. In  reality,  it  is  quite  simple,  as  appears  when 
the  principle  is  applied  to  the  accounting  of  the  United 
States  Steel  Corporation  for  the  year  iQio,1  a  brief  of 
which  follows: 

Gross  Receipts $703,961,424.41 

Subtract  operating  charges  (up- 
keep) and  there  remains 

Net  Earnings iS°,73S>749-96 

Subtract  interest,  depreciation, 
and  sinking-fund  charges,  and 
there  remains 

Net  Income 87,407,184.82 

Subtract  dividends  there  remains 

Surplus  Net  Income 36,772,382.82 

Subtract  appropriations  for  ad- 
ditional property,  new  plants, 
and  contract  and  mining  royal- 
ties, and  there  remains 

Balance  of  Surplus 10,772,382.82 

Add  undivided  surplus  Decem- 
ber 3,  1910,  and  there  is, — 

Total  Surplus $105,438,718.67 

These  figures  show  that  after  the  running  expenses 
of  the  business  were  paid,  a  fifth  of  the  total  receipts 
for  the  year  remained.  These  were  applied  to  de- 
preciation, interest,  dividends,  and  surplus.  Mean- 
while, the  company  was  carrying  a  comfortable  sur- 
plus of  a  hundred  millions. 

Apply  this  principle  of  accounting  to  the  family 
of  an  ordinary  wage-earner.  On  page  seventy  of 

1  "Report  of  the  Commission  of  Corporations  on  the  Steel  Indus- 
try." Washington,  1911,  Part  I,  pp.  330-332. 


PROPERTY  INCOME  AND  PRODUCERS   OF  WEALTH      179 

Chapin's  study  of  "The  Standard  of  Living  in  New 
York  City,"  certain  facts  appear  for  the  families 
that  were  receiving  a  "fair"  wage  ($800  to  $900  per 
year). 

1.  Gross  Receipts' $846.26 

(Total  average  income  per  family) 

2.  Operating  Expenses 804. 26 

(Up-keep) 

3.  Gross  Income 42.00 

The  up-keep  of  the  family  (food,  clothes,  shelter, 
and  medicines)  absorbs  over  95  per  cent,  of  the  re- 
ceipts. The  remaining  $42.00  must  cover — 

1.  Depreciation.    First  on  the  furniture  and  other 

property  of  the  family.  Second,  on  the 
earning-power  of  the  bread-winner.  Cor- 
porations charge  "amortization"  against 
mining  properties.  The  earning-power  of 
the  bread-winner  fails  sooner  or  later  no 
less  surely  than  the  producing  power  of  a 
mine.  In  some  trades  (white  lead,  struc- 
tural iron,  and  other  high-risk  industries) 
the  depreciation  is  rapid.  In  either  case,  the 
charge  should  be  sufficient  to  make  up  for 
lost  earning-power,  and  to  protect  against 
hardship  in  old  age. 

2.  Interest.     The  capitalist  demands  an  interest 

return  because  he  invests  in  a  business.  The 
worker  invests  his  time,  energy,  and  all  of  his 
income  in  his  family.  He,  himself,  repre- 
sents an  outlay  for  up-bringing,  education, 
and  the  like. 

3.  Dividends.     The  investor   demands  dividends 


l8o  INCOME 

because  of  the  risk  involved  in  an  invest- 
ment. The  worker  who  has  married  and 
brought  a  family  into  the  world  on  the 
present  wage-scale,  runs  as  great  a  risk  as 
any  man  might  conceive  of. 

4.  Surplus.  There  should  be  something  laid  by 
for  future  exigencies.  Those  four  require- 
ments are  to  be  covered,  in  this  case,  by 
$42.00  for  a  family  of  five  people.  There  is 
room  for  neither  stock  watering  nor  any  other 
form  of  high  finance. 

Furthermore,  this  reasoning  applies  to  incomes  of 
$2.50  to  $3.00  per  working-day.  Probably  three- 
quarters  of  the  adult  male  workers  in  American  in- 
dustry are  paid  less  than  that  amount. 

Here  and  there  talk  is  rife  about  "high"  wages. 
The  various  studies  of  American  industrial  centers 
have  placed  the  cost  of  decent  living  for  a  man,  wife, 
and  three  small  children  at  from  $750  to  $1,000.  This 
cost  is  a  bare  up-keep  cost,  and  a  great  proportion  of 
adult  male  wage-earners  do  not  receive  even  that. 
Beyond  it  are  charges  made  by  every  legitimate 
business  for  depreciation,  interest,  dividends,  and 
surplus,  which  the  receipts  of  the  wage-earner  will 
not  even  approach. 

Strictly  speaking,  the  great  body  of  male  American 
wage-earners  receive  no  "income."  They  receive 
a  wage  which  provides  bare  family  up-keep.  In  their 
accounts  is  no  mention  of  those  stabilizing  and 
regulative  charges  which  modern  business  men  have 
learned  to  demand  as  a  right, — depreciation,  interest, 
and  dividends.  Were  the  workers  to  make  a  study  of 


PROPERTY  INCOME  AND   PRODUCERS  OF  WEALTH      l8l 

business  bookkeeping  and  to  apply  the  result  of  their 
knowledge  to  their  own  family  affairs,  they  would 
find  that  a  great  majority  of  their  family  accounts 
would  show  an  annual  net  loss  or  deficit.  Only  a  small 
fraction  of  the  accounts  would  show  a  net  surplus 
after  deducting  legitimate  fixed  business  charges. 
The  business  man  receives  "income"  after  he  has  met 
his  running  expenses  and  paid  his  fixed  charges.  The 
ordinary  worker,  with  a  family,  makes,  in  a  great  ma- 
jority of  cases,  bare  running  expenses. 

The  student  of  income,  who  is  familiar  with  the 
devices  employed  by  the  business  world  to  safeguard 
property  investments,  finds  it  difficult  to  be  tolerant 
of  those  many  apologists  for  the  present  economic 
order  who  insist  that  "labor  gets  all  it  is  worth;"  that 
"workers  are  paid  more  than  enough  already;"  that 
"there  are  already  more  men  who  are  over-paid  than 
under-paid; "  that "  the  real  difficulty  lies  in  the  waste- 
fulness of  the  working  population."  The  utter  ab- 
surdity of  such  comments,  in  the  face  of  even  a  super- 
ficial examination  of  the  points  at  issue,  requires  no 
comment.  In  considering  the  economic  adequacy  of 
service  income,  the  average  speaker  and  writer  has 
not  even  attempted  to  apply  the  same  rules  to  the 
safeguarding  of  human  interests  that  are  applied  to 
safeguarding  the  interests  of  property. 

XI.  The  Rigidity  of  Service  Income 

Property  income  may  be  amassed,  indefinitely,  in 
the  hands  of  one  individual.  Service  income  may  not 
comprise  more  than  the  returns  for  the  services  of 
the  one  individual,  More  than  that,  the  possibility 


l82  INCOME 

of  securing  any  considerable  increase  in  service  in- 
come is  woefully  limited  by  the  organization  of 
modern  industry. 

Despite  the  current  assertion  that  "There  is  plenty 
of  room  at  the  top,"  and  that  consequently  anyone 
may  come  up  from  the  crowded  tenements  into  the 
spacious  mansions  whose  wide  flung  doors  invite  the 
overburdened  to  an  infinity  of  relaxation  and  rest, 
the  possibilities  of  advancement  are  rigidly  restricted. 

Tradition,  aphorisms,  proverbs,  and  successful  men 
to  the  contrary  notwithstanding,  the  room  at  the  top 
is  a  myth.  Glance  for  a  moment  at  the  facts.  A  recent 
strike  among  the  Paterson  (New  Jersey)  silkworkers 
aroused  considerable  interest.  Why  did  not  the 
workers  "rise"  instead  of  striking?  An  appeal  to 
the  last  census  furnished  a  conclusive  answer.  In 
1909  there  were,  in  the  silk  mills  of  New  Jersey,  306 
proprietors  and  firm  members;  518  salaried  officials, 
superintendents,  and  managers;  1,256  clerks;  and 
30,285  wage  earners.  For  each  firm  member,  there 
were  six  salaried  officials  and  clerks  and  ninety-three 
wage-earners.  Granted  that  all  of  the  firm  members 
were  recruited  "from  the  ranks,"  each  worker  would 
have  one  chance  in  ninety-three  of  becoming  a  firm 
member.  On  a  larger  scale,  the  manufacturing  indus- 
tries of  the  entire  country,  employing  more  than 
seven  millions  of  people,  show  a  similar  situation. 
In  the  cotton  goods  industry  the  proportion  of  wage- 
earners  rises  to  97.77  of  the  total  of  gainfully  em- 
ployed persons.  Comparisons  even  more  striking 
may  be  had  from  the  railroad  industry.  Of  the  total 
number  of  employees  (1,669,809)  almost  exactly  one 
in  three  hundred  is  a  general  officer.  Granted,  that 


PROPERTY   INCOME   AND  PRODUCERS  OF  WEALTH      183 

all  of  the  general  officers  were  picked  from  the  ranks, 
and  that  the  working  life  of  wage-earners  and  general 
officers  were  the  same  (which,  by  the  way,  they  are 
not — the  general  officers  living  considerably  longer) 
each  employee  would  have  one  chance  in  three  hun- 
dred of  becoming  a  general  officer. 

When  all  is  said,  the  organization  of  modern  indus- 
try is  such  that  in  the  absence  of  some  outside  influ- 
ence such  as  education,  or  "pull,"  the  low-skilled 
worker  is  condemned  to  a  life  of  low-skilled  work. 
Receiving  a  subsistence  wage,  he  is  unable  to  do  more 
than  make  ends  meet,  except  by  living  under  the 
most  abject  conditions,  or  by  exceptional  manage- 
ment. Lacking  training,  capital,  and  surplus  energy, 
the  low-skilled  worker  may  neither  rise  in  industry, 
nor  may  he  begin  an  industry  of  his  own.  Until  re- 
cently free  land  and  farm  ownership  offered  him  an 
alternative.  To-day  free  land  is  gone.  Even  though 
land  were  still  free,  the  amount  of  capital  necessary 
for  the  proper  management  of  a  modern  farm  is  pro- 
hibitive to  the  man  without  means  or  credit.  The 
low-skilled  worker  may  not  change  his  lot  by  rising, 
or  by  striking  out  for  himself.  Barriers  appear  in 
both  directions  which  are  surmountable  by  the  man 
of  unusual  ability  and  of  great  energy  alone.  To 
the  ordinary  men,  the  limitations  which  they  prescribe 
are  absolute. 

Another  factor  must  be  dealt  with,  in  the  same  con- 
nection. The  modern  plan  of  industrial  organization 
which  calls  for  four  managers,  superintendents  and 
foremen,  six  clerks,  twenty  skilled  men  and  seventy 
semi-skilled  "machine  hands"  and  unskilled  "la- 
borers" is  almost  as  fatalistic  for  the  children  of  the 


184  INCOME 

unskilled  laborers  as  was  the  Feudal  system  for  the 
children  of  the  serfs. 

The  wage  of  the  unskilled  father  is  meager,  the 
son  must  leave  school  at  fourteen  to  help  support 
the  family.  The  job  which  the  son  gets  is  a  monot- 
onous, non-educational,  "dead-end"  job,  which  be- 
gins his  training  as  a  low-skilled  worker.  His  home 
has  been  wretched;  his  life  has  been  lived  on  the 
street;  his  ideals  have  been  low;  the  examples  before 
him  have  not  inspired  him  to  great  effort;  he  has  been 
poorly  fed;  in  short,  his  whole  life  has  prepared  him  to 
follow  in  the  footsteps  of  his  father,  and  to  become  a 
low-skilled  man.  Thus  the  curse  of  poor  training  and 
inefficiency  is  handed  down  from  father  to  son,  through 
one  generation  after  another. 

The  rigidity  of  the  present  economic  system  makes 
a  material  increase  in  service  income  unlikely,  for 
either  a  man  or  his  descendants.  Arbitrary  to  the 
point  of  fatalism,  the  economic  system  ties  the  worker 
hand  and  foot  to  a  standard  of  service  income  over 
which  he  has  the  most  meager  control. 

XII.  The  Instability  of  Service  Income 

Property  income  is  relatively  stable.  Numerous 
and  effective  safeguards  have  been  thrown  around  it. 
Despite  occasional  breaks  in  the  abattis  protecting 
property  income  rights,  as  a  general  rule,  the  defenses 
erected  by  the  propertied  classes  have  proved  well- 
nigh  impregnable. 

With  those  receiving  service  income,  the  situation 
is  far  different.  Excepting  the  small  percentage  of 
high-salaried  workers,  the  great  mass  of  those  who 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      185 

receive  service  income  are  forced  to  struggle  in  a  sea 
of  economic  uncertainties.  There  are  five  forces, 
always  confronting  the  workers,  any  one  of  which 
may  reduce  or  entirely  eliminate  service  income. 
They  are  (i)  Overwork,  (2)  Sickness  and  Accidents, 
(3)  Invention  of  New  Machinery,  (4)  Shutting-down 
of  Individual  Plants,  and  (5)  Industrial  Crises. 

Industry  offers  the  workingman  an  opportunity  to 
earn  a  living,  subject  to  the  caprice  of  overwork, 
sickness,  accidents,  new  machinery,  individual  shut- 
downs and  general  suspensions  of  industrial  activity — 
a  hierarchy  of  forces  which  overshadow  every  move- 
ment of  his  life,  threatening  continually  to  hurl  him 
into  an  abyss  of  hardship  and  misery.  Anyone,  or 
any  combination  of  these  five  forces,  may,  at  any 
time,  diminish,  temporarily  or  permanently,  the 
income-earning  capacity  of  the  worker.  All  of  them 
are  beyond  his  individual  control,  yet  they  strike, 
with  merciless  certainty,  the  livelihood  sources  of 
the  family  in  which  they  occur. 

XIII.  The  Superior  "Right"  to  Property  Income 

There  seems  to  be  no  escape  from  the  conclusion 
that  the  present  economic  system  is  so  organized  as 
to  throw  the  balance  of  advantage  into  the  pockets 
of  those  who  own  income-yielding  property.  Despite 
the  superior  social  value  of  services;  despite  the  ob- 
vious justice  of  favoring  the  service  Tenderers  rather 
than  the  property  owners,  a  system  has  been  estab- 
lished which  places  a  higher  stamp  of  economic  ad- 
vantage upon  the  ownership  of  property  than  it 
places  on  the  rendering  of  services. 


1 86  INCOME 

A  review  of  the  facts  makes  the  conclusion  inevi- 
table. Property  income  has  a  prior  claim;  is  more 
stable  and  more  permanent  than  service  income. 
Service  income  is  small  in  amount;  socially  and  eco- 
nomically insufficient,  rigid  and  unstable  to  the  last 
degree.  The  twentieth-century  economic  world  has 
given  property  income  the  right  of  way. 

The  truth  regarding  the  relative  positions  of  service 
and  of  property  incomes  is  epitomized  in  the  attitude 
of  the  modern  community  toward  the  right  to  service 
and  to  property  income.  Even  where  the  law  on  the 
point  is  hazy,  morality  and  tradition  are  clear  cut. 

There  is  no  such  thing  as  a  "right  to  work"  in 
modern  society.  Men  talk  glibly  of  the  "right  of 
every  American  citizen  to  work  when  he  pleases,  where 
he  pleases,  and  for  whom  he  pleases."  These  same 
gentlemen  would  be  slow  indeed  to  permit  any  citi- 
zen to  enter  their  plants  unasked,  and  preempt 
a  job.  Even  were  they  regularly  employing  these 
same  citizens,  they  would  hesitate  about  allowing 
them  to  begin  or  quit  work  after  or  before  regular 
hours.  They  would  be  still  less  willing  to  have  the 
workers  stop  work  on  two  or  three  days  each  week, 
or  to  leave  the  plant  in  a  body  and  organize  what  is 
called  a  "strike."  There  is  no  real  belief  anywhere  hi 
the  community  that  a  man  has  a  right  to  work  when, 
where,  and  for  whom  he  pleases. 

A  laborer  may  secure  a  job  by  asking  for  it,  and 
making  a  contract  with  his  employer  to  work  under 
certain  conditions.  He  has  no  "right"  to  work,  that 
the  employer,  the  courts  or  the  public  recognizes. 

The  modern  State  does  guarantee  all  of  its  citizens 
against  starvation.  The  poorhouse,  such  as  it  is,  is 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      187 

always  open.  There  never  has  been  and  there  is  not 
now,  a  right  to  work  anywhere  in  the  United  States. 

While  there  is  no  right  to  work,  there  is  a  right  to 
property  income.  The  right  is  recognized  in  the  courts 
only  in  a  limited  sense.  It  is  universally  accepted  by 
public  opinion. 

Every  man  who  has  a  hundred  dollars  feels  and 
asserts  that  he  has  a  right  to  interest  on  that  money. 
There  is  scarcely  an  owner  of  income-yielding  property 
in  the  United  States  who  does  not  bitterly  resent  the 
statement  that  interest  is  wrong.  A  few  property 
owners  have  been  convinced  but  the  great  majority 
rest  firm  hi  the  opinion  that  interest  is  just  and  that 
they  have  "a  right"  to  interest  on  income-yielding 
property. 

The  practices  of  the  community  give  color  to  this 
insistence  on  the  right  to  property  income.  Anyone 
may  go  to  a  bank  or  trust  company  during  the  business 
hours  of  any  day,  and  by  making  a  deposit  of  $100 
secure  the  right  to  three  dollars  of  interest  per  year. 
Anyone  may  exchange  $1,000  for  a  railroad  bond  and 
thus  secure  the  right  to  fifty  dollars  of  interest  per 
year.  The  business  world  abounds  in  opportunities 
to  secure  income-yielding  property,  and  apart  from 
any  abstract  consideration,  the  present  economic 
system  enables  anyone  who  has  a  sum  of  transferable 
wealth  to  secure  an  interest  return  on  it.  Whatever 
may  be  its  theoretical  status,  property  income  in  prac- 
tice is  a  right. 

The  issue  is  brought  out  very  dearly  in  another 
connection.  While  the  courts  have  consistently  re- 
fused to  fix  a  minimum  for  service  income,  they  have 
insisted  on  a  minimum  for  property  income.  By 


1 88  INCOME 

this  distinction  they  have  virtually  placed  themselves 
on  record  as  approving  a  right  to  property  income 
while  they  disapproved  a  right  to  service  income. 

The  law  has  repeatedly  refused  to  interfere  with  the 
conditions  of  labor.  The  laborer  who  made  a  contract 
to  work  for  a  dollar  a  day  might  not  go  before  the 
courts  and  ask  to  have  this  rate  increased  on  the 
ground  that  a  dollar  a  day  was  not  a  fair  return  for 
ten  hours  of  labor.  To  pleas  of  similar  tenor,  regard- 
ing the  labor  of  minors,  compensation  for  accidents 
and  the  like,  the  courts  have  replied  that  when  the 
contract  was  made,  the  laborer  agreed  to  accept  the 
conditions  of  his  employment.  How  futile,  then,  to 
protest  against  them!  Each  man,  free  to  contract  or 
not  to  contract,  assumed  the  responsibility  for  the 
surroundings  of  the  employment  when  he  accepted 
the  position.  If  he  did  not  like  the  conditions,  after 
trying  them  out,  he  was  always  at  liberty  to  change 
his  job. 

Public  opinion  and  legal  sanction  have  alike  refused 
the  laborer  any  appeal  from  the  amount  of  his  wage. 
The  fact  that  "freedom  of  contract"  was  a  meaning- 
less phrase,  coined  by  legal  technicians,  never  served 
as  a  bar  to  its  use  against  those  who  exchanged  their 
services  for  income. 

Latterly,  the  proposal  and  enactment  of  minimum 
wage  laws,  has  marked  a  significant  change  in  public 
opinion.  At  least  in  the  case  of  women  the  question 
of  the  adequacy  of  service  income  is  being  raised.  It 
is  not  sufficient  that  a  girl  receive  a  "wage."  She 
must,  at  the  same  time,  receive  a  "living  wage"- 
that  is,  one  that  will  maintain  her  health  and  effi- 
ciency. The  concept  is  revolutionary.  Rightly 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      189 

directed  and  generally  applied,  it  will  result  ultimately 
in  fixing  a  minimum  service  income  right.  Although 
it  does  not  guarantee  the  right  to  work,  it  will  guaran- 
tee a  fair  return  for  work  performed. 

The  neglect  of  the  courts  to  fix  minimum  standards 
for  service  income  has  been  more  than  counter- 
balanced by  the  alacrity  with  which  they  have  estab- 
lished minimum  standards  for  property  income.  The 
work  of  public  service  and  railroad  commissions  well 
illustrates  this  attitude. 

Public  service  and  railroad  commissions  were 
created  for  the  purpose  of  curbing  the  predatory  ac- 
tions of  the  public  utilities.  They  entered  upon  a  task 
fraught  with  possibilities.  Franchises,  secured  free 
or  for  a  trifling  cost,  had  been  capitalized  and  sold; 
values  had  been  hypothecated;  stocks  had  been  wa- 
tered. In  the  case  of  many  of  the  railroads,  the  bonds 
had  been  issued  against  the  physical  property,  leaving 
the  stock  to  represent  good  will  and  earning  power. 
The  passage  of  years  with  the  increase  in  population 
and  therefore  in  franchise  and  land  values  had  raised 
the  value  of  the  properties.  In  many  cases,  excessive 
profits  had  been  turned  back  into  the  business,  capi- 
talized, and  the  stock  given  or  sold  to  stockholders. 
By  the  many  methods  known  to  the  manipulators 
of  corporation  finance,  the  theoretical  values  had  been 
converted  into  assets.  Some  of  the  railroad  and 
public  utilities  commissions,  appointed  to  represent 
the  public  interests,  took  a  bold  stand — they  decided 
to  make  a  physical  valuation  of  the  property  of  the 
various  utilities,  and  to  refuse  to  allow  them  to  make 
more  than  a  reasonable  return  on  the  ascertained 
physical  value.  The  original  property  might  have 


190  INCOME 

been  stolen  or  secured  legitimately.  It  might  rep- 
resent cash  invested,  increased  land  values,  or  re- 
invested earnings.  In  any  case,  the  owners  of  the 
property  were  entitled  to  a  fair  return  on  its  physical 
value.  Such  decisions  have  been  repeatedly  upheld 
by  the  courts,  which  have  gone  farther,  and  fixed  the 
"fair  rate  of  return"  at  so  much  per  cent. 

Among  the  commissions,  only  the  boldest  under- 
took physical  valuations.  Even  then  there  was 
scarcely  a  suggestion,  or  an  act,  which  would  indicate 
that  the  utilities  had  not  a  right  to  an  interest  return 
on  the  then  physical  value  of  the  property. 

The  point  need  not  be  further  stressed.  The  facts 
are  universally  known.  They  are  not  so  generally 
understood. 

The  care  which  society  takes  of  property  income, 
/    and  its  comparative  inolifference  to  service  income, 
is  but  another  segment  of  the  great  conflict  which~is~ 
\     being  vigorously  waged  between  the  owners  of  prop- 
\    erty  and  the  people  who  work  with  their  property  and 
do  their  bidding. 


XIV.  A  Survey  of  the  Field 

A  survey  of  the  relative  positions  occupied  by  the 
recipients  of  service  and  of  property  income,  shows 
that  the  property  owners  hold  practically  all  of  the 
strategic  points.  They  are  supported  by  tradition; 
bulwarked  by  custom,  and  protected  by  most  of  the 
motive  forces  of  society.  The  social  mind  and  the 
social  structure  alike  have  been  shaped  so  that  they 
would  function  in  terms  of  property  income  rights 
and  privileges. 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      IQI 

Those  who  receive  service  income  have  the  advan- 
tage of  numbers  and  the  possibilities  of  organized 
action.  Many  of  them  are  convinced  of  the  essential 
injustice  of  their  position.  Otherwise  they  are  com- 
pelled to  go  weaponless  into  the  conflict. 

Economic  forces  are  pushing  forward  the  issue. 
They  have  placed  on  one  side  the  majority  of  the 
population,  who  carry  the  burdens  of  economic  so- 
ciety, and  put  forth  the  energy  necessary  to  propel 
industry.  On  the  other  side,  the  economic  forces 
have  ranged  a  small  group  of  persons  in  whose  hands 
is  concentrated  the  great  bulk  of  the  income-yielding 
wealth  of  the  community.  The  forces  of  economic 
society  are  sharpening  the  contrast  between  service 
and  property  income,  and  adding  daily  to  the  irony 
of  a  status  which  compels  workers  to  skimp  and  ab- 
stain while  property  owners  may  idle  and  luxuriate. 

Wherever  one  group  in  a  community  secures  large 
income  returns  without  participating  in  the  work  of 
creating  those  returns,  while  another  group  in  the 
same  community  carries  the  burden  of  the  work  and 
at  the  same  time  receives  a  meager  share  of  the  prod- 
uct of  its  labor,  there,  sooner  or  later,  a  conflict  will 
arise.  The  conflict  may  be  peaceful,  and  long  drawn 
out,  like  that  between  the  English  peasantry  and  the 
English  landlords,  or  it  may  be  dramatic,  spectacular 
and  bloody  like  that  between  the  French  peasantry 
and  their  landlords.  The  conflict  will  come,  however, 
because  if  there  is  one  deep-rooted  conviction  in  the 
human  breast,  it  is  that  each  person  has  a  right  to 
what  he  earns.  Crude  indeed  are  the  definitions,  and 
the  ideas  and  standards  for  "earning"  are  incomplete. 
Always  the  thought  is  there  in  its  most  general  form, 


I Q2  INCOME 

carrying  with  it  the  possibility  of  revolt  against  any 
economic  order  which  denies  to  a  man  the  right  to  his 
full  earnings. 

The  economic  conflict  in  the  United  States  will 
eventually  develop  between  property  owners  and  the 
producers  of  wealth.  There  can  never  be  an  organized 
strife  here  between  the  serf  or  tenant  on  the  one  hand, 
and  the  landlord  an  the  other.  There  is  no  such  clear 
cut  issue.  A  Russian  serf  had  a  definite  position  in 
society.  In  every  way  the  term  was  significant.  The 
American  "laborer"  is  no  such  generic  personage. 
From  the  lowest  to  the  highest,  the  ranks  of  those  who 
work  in  the  United  States  are  divided  among  a  large 
number  of  professions  and  occupations,  some  of  which 
pay  princely  salaries,  and  some  of  which  pay  the 
barest  subsistence  wages.  A  student  of  current  Amer- 
ican economic  facts  is  forced  to  the  conclusion  that 
there  is  only  one  economic  contrast  that  can  be  made 
clear  cut  and  definite — the  contrast  between  service 
income  and  property  income;  between  income  secured 
as  a  return  for  effort,  and  income  secured  in  return 
for  property  ownership. 

The  facts  in  the  case  point  clearly  to  the  distinction 
between  service  income  and  property  income.  The 
line  of  future  contrast  and  of  future  conflict  is  the 
line  which  separates  these  two  ideas. 

The  issue,  as  it  confronts  the  American  people,  is  a 
very  new  one,  which  never  could  have  arisen  had  con- 
ditions remained  as  they  were  a  century  ago.  While 
a  large  proportion  of  the  people  in  a  community  hold 
property,  there  can  be  no  conflict  over  property 
ownership.  So  long  as  men  could  cross  the  frontier, 
and  by  taking  up  free  land,  become  property  owners 


PROPERTY  INCOME  AND   PRODUCERS   OF  WEALTH      193 

at  will,  it  was  impossible  to  stimulate  interest  in  prop- 
erty income  as  opposed  to  service  income.  The  open 
public  domain  was  an  effective  answer  to  most  of 
the  objections  that  were  directed  against  property 
ownership  and  property  income. 

The  spirit  engendered  by  property  ownership  ex- 
hibits itself  dramatically  in  small,  well-to-do  towns, 
surrounded  by  prosperous  farms.  The  entire  popula- 
tion of  such  places  look  with  unrelieved  dread  upon 
every  proposition  that  in  any  way  affects  property 
rights.  The  people  ask  only  that  they  be  let  alone, 
and  removed  from  any  part  in  the  conflict  which 
industrial  development  has  fomented — the  same  in- 
dustrial development  which  has  led  to  the  increase 
in  town  land  values.  4Such  towns  with  their  spirit 
of  hostility  toward  all  propositions  that  look  to  the 
disturbance  of  property  rights,  typify  the  conditions 
in  a  society  where  property  ownership  is  the  rule,  and 
not  the  exception.  In  the  same  proportion  that  prop- 
erty ownership  is  prevalent,  the  property  spirit  and 
the  property  philosophy  permeates  the  thought  of  a 
community. 

As  a  result  of  the  concentration  of  property  owner- 
ship, and  of  the  development  of  property  forms  which 
automatically  yield  an  income  to  the  possessor,  a 
situation  has  been  created  in  which  a  great  part  of 
the  community  depends  solely  or  largely  upon  the 
expenditures  of  effort  as  a  means  of  securing  income, 
while  another  part  of  the  community — a  smaller 
group — receive  their  income  chiefly  from  property 
ownership. 

Perhaps  the  United  States  has  not  yet  reached  the 
point  where  an  open  breach  may  be  expected  between 


IQ4  INCOME 

those  who  receive  service  income  and  those  who  re- 
ceive property  income.  Certainly  the  crisis  in  the 
conflict  has  not  yet  come.  Nevertheless,  one  who  has 
watched  the  developments  of  the  past  few  years — 
who  has  followed  the  labor  movement  in  its  larger 
phases,  who  has  given  ear  to  the  undercurrents  of 
socialistic  thought  and  syndicalistic  agitation,  cannot 
help  feeling  that  the  United  States  is  moving  toward 
the  crisis  at  breathless  speed. 

Nowhere  in  the  world,  perhaps,  is  wealth  being 
produced  in  vaster  amounts  than  it  is  in  the  United 
States.  The  country  is  reported  prosperous.  Go 
where  one  will,  he  will  find  the  producers  of  wealth 
living,  for  the  most  part,  in  straitened  circum- 
stances. They  do  not  starve,  to  be  sure,  but  they 
do  fight  a  hard,  and  sometimes  a  losing  fight  with 
those  great  enemies,  cold  and  hunger.  On  the  other 
hand,  the  family  hotels,  luxurious  apartment  houses, 
summer  resorts,  winter  resorts,  cruises,  tours,  and 
pleasure  halls  harbor  thousands,  many  of  whom 
have  never  lifted  a  finger  toward  the  production 
of  wealth,  and  most  of  whom  are  enjoying  incomes 
far  and  away  above  the  value  of  their  service  contribu- 
tions to  society. 

The  irony  of  the  situation  does  not  lie  mainly  in 
the  contrast,  though  it  is  ironical  enough  to  see  the 
worker,  skimping,  and  the  idler,  squandering.  The 
irony  of  the  situation  lies  in  the  accusation  of  extrava- 
gance, incompetence,  wastefulness,  inefficiency,  idle- 
ness and  dissipation  brought  by  some  of  the  recipients 
of  property  income  against  those  who  serve. 

The  recipients  of  property  income  are  the  bene- 
ficiaries of  power.  Behind  them  they  have  constitu- 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      195 

tions,  laws,  customs,  beliefs,  philosophies,  practices, 
and  conventionalities  that  are  ages  old.  They  draw 
upon  the  resources  of  a  system  of  social  organization 
that  has  been  evolving  with  the  evolution  of  civiliza- 
tion. Their  economic  advantage  is  the  direct  outcome 
of  the  repressive  coercive  activities  of  vested  interests 
all  through  the  ages.  They  constitute  one  generation 
in  the  lineal  descent  of  exploiters — monarchs,  land- 
lords, slave-owners,  capitalists,  and  all  of  those  who 
have  devised  means  of  living  at  the  expense  of  the 
toil  of  their  fellows.  Those  who  receive  incomes 
from  property  rights,  hold  their  titles  and  draw  their 
income  out  of  the  struggles  which  the  propertied 
class  have  waged,  and  thus  far  successfully,  to  keep 
in  their  hands  the  power  to  tax  the  labor  of  mankind. 

All  historic  civilizations  have  developed  a  proper- 
tied class,  which  enjoyed  leisure  and  luxury.  To 
provide  this  leisure  and  luxury,  the  great  body  of 
citizens,  serfs  and  slaves  labored,  suffered,  fought  and 
died.  The  Western  World  has  produced  the  most 
effective  means  ever  devised  (titles  to  transferable 
income-yielding  property)  for  enabling  one  group  in 
the  community  to  live  upon  the  work  done  by  the 
others. 

Perhaps  the  most  menacing  of  all  American  insti- 
tutions is  the  perfected  organization  which  enables 
the  few  to  live  at  the  expense  of  the  many.  In  three 
centuries,  the  United  States,  in  company  with  West- 
ern civilization,  has  produced  or  at  least  tolerated  a 
system  which  automatically  takes  from  the  values 
created  in  the  industrial  processes,  a  certain  propor- 
tion, and  places  it  in  the  hands  of  any  person  or  any 
association  which  at  that  particular  time  happens  to 


196  INCOME 

hold  the  key  which  unlocks  the  Golden  Flood — the 
key  of  property  ownership.  This  income  is  not  paid 
as  a  reward  for  virtue;  people  receive  it  who  are  vi- 
cious. It  is  not  paid  in  return  for  meritorious,  social 
service;  some  of  those  who  receive  it  are  notoriously 
anti-social  in  all  of  their  dealings.  It  is  not  paid  for 
abstinence;  many  of  the  recipients  of  property  income 
never  knew  what  it  was  to  abstain.  It  is  not  paid 
for  saving;  there  are  people  with  vast  incomes,  who 
during  their  entire  lives  have  never  done  anything 
except  spend.  It  is  not  paid  for  productive  effort; 
children,  disabled  persons,  idlers  and  wastrels  are 
among  its  recipients.  There  is  one  thing  and  one 
thing  only,  for  which  property  income  is  paid,  and 
that  is  the  ownership  of  a  piece  of  property  which  is 
so  scarce  and  so  desired  by  another  that  he  is  willing 
to  give  a  return  for  the  privilege  of  using  it.  To-day 
the  ownership  of  property  gives  to  the  owner  a  royalty 
privilege.  He  may  always  invest  it  and  receive  five 
per  cent,  on  it.  It  is  virtually  a  power  to  tax,  exer- 
cised by  an  individual  owner  of  property  against  the 
productive  activities  of  the  community,  and  exercised 
because  of  the  title  deeds  which  the  property  owner 
holds. 

The  time  has  come  when  the  facts  must  be  faced 
honestly.  Those  who  are  convinced  that  the  workers 
get  all  they  earn,  and  that  even  if  they  did  get  more, 
they  would  squander  it;  those  who  defend  property 
interests  and  property  income  are  not  interested  in 
widows  and  in  orphans;  are  not  interested  in  bringing 
about  an  adjustment  which  will  conform  to  the  de- 
mands of  human  decency  and  social  justice.  They 
do  not  wish  to  know  whether  there  is  income  enough 


PROPERTY  INCOME  AND  PRODUCERS  OF   WEALTH      197 

to  go  around,  but  rather  whether  there  is  income 
enough  to  pay  the  producers  what  they  demand,  and 
then,  or  even  before  then,  to  pay  to  the  owners  of 
property,  a  share  of  the  products  of  industry  in  return 
for  their  property  ownership.  The  question,  as  it  is 
asked  by  the  long-headed  defenders  of  vested  power 
is  simply  this — "Is  there  income  enough  to  pay  in- 
terest on  the  bonds  of  the  country  (some  34  billions  of 
them)  and  thus  keep  business  stable;  to  pay  wages 
and  salaries  to  the  producers  of  wealth,  and  keep  the 
world  going;  and  to  return  a  dividend  to  the  owners 
of  stocks,  and  where  separately  held,  to  the  owners  of 
land — to  the  first  because  of  an  investment  of  capital; 
to  the  second  as  a  recompense  for  holding,  as  his  own, 
a  part  of  the  earth's  surface?  That  is  the  real  ques- 
tion as  it  is  really  asked.  Thus  far  the  answer  has 
been  steadily  affirmative.  There  have  been  sugges- 
tions and  protests,  but  the  question  has  generally  met 
with  favorable  consideration. 

What  will  be  the  answer  to  the  demand  of  vested 
incomes  in  the  future?  What  new  note  will  sound  in 
response  to  their  proposition?  What  form  will  their 
proposition  take? 

As  the  country  grows  in  population,  in  wealth,  and 
in  producing  power,  the  proposition  advanced  by  the 
owners  of  vested  interests  must  of  necessity  take  on  a 
different  tone.  Instead  of  asking  whether  there  is 
enough  wealth  created  in  the  productive  processes  to 
pay  interest  dividends  and  rent,  they  must  ask — "Will 
the  producers  of  wealth  shoulder  a  constantly  increas- 
ing burden?  These  land  values  are  rising;  the  amount 
of  capital  in  the  country  per  productive  worker  and 
per  capita  of  the  population  is  growing  constantly 


198  INCOME 

greater.  As  producers,  will  they  carry  the  increased 
load?  As  consumers,  will  they  pay  the  increased  tax 
on  their  prices?  " 

Were  the  tax  demanded  by  property,  a  fixed  one, 
the  question  might  be  settled  once  and  for  all,  but 
the  tax  is  increasing,  actually  and  proportionally, 
hence  the  new  aspect  which  the  issue  assumes. 

There  is  income  enough  to  go  around.  If  all  those 
who  participate  in  the  production  of  wealth  received 
an  equal  share  of  the  wealth  produced,  the  whole  of 
American  society  would  be  able  to  live  on  a  standard 
of  splendid  comfort.  If  even  the  present  proportions 
were  maintained  between  wages  and  salaries,  if  some 
were  high  paid  and  some  low  paid  for  their  share  in 
productive  activity,  there  is  income  enough  created 
to  provide  for  every  family  in  the  United  States  a 
decent  living  (concretely  in  industrial  centers,  $750 
per  year  in  moderate  sized  towns  and  $900  to  $1,000 
a  year  in  great  cities)  and  to  pay  many  more  families 
than  now  receive  it  a  standard  of  comfort  and  even 
of  luxury. 

Is  there  income  enough  to  go  around?  Indeed  there 
is!  The  immediate  trouble  lies  in  the  fact,  not  that 
there  is  not  enough  to  go  around,  but  that  it  is  not 
made  to  go  around. 

Instead  of  going  around,  a  large  percentage  of  the 
values  created  in  industry  go  straight  into  the  coffers 
of  property  holders,  who  are,  almost  universally,  the 
well-to-do.  These  values  never  even  start  around, 
but  they  are  directed,  by  the  self-acting  system  of 
property  control,  to  those  who  own  property. 

Income  is  measured  in  terms  of  power  and  not  in 
terms  of  worth.  The  masses  of  mankind,  whose  only 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH      199 

power  lies  in  their  numbers  and  their  organization 
into  effective  working  bodies,  would  do  well  to  ponder 
the  difference  and  to  understand  the  necessity  for 
transferring  power  from  the  few  who  have,  to  the 
many  who  need. 

XV.  The  Future  of  the  Issue 

The  student  will  search  hi  vain  through  history 
for  a  stituation  more  fraught  with  destructive  possi- 
bilities. The  recipients  of  property  and  of  service 
income  face  each  other  and  prepare  for  the  conflict. 
Those  who  have  put  forth  the  effort,  declare  their 
right  to  the  products  of  that  effort.  Those  who  own 
property  hold  fast  to  their  property  titles  and  to  the 
prerogatives  which  are  inseparable  from  them. 

Law,  custom,  and  business  practice  have  made 
property  income  a  first  charge  on  industry.  There 
can  be  no  considerable  readjustment  of  income  values 
until  the  preeminent  position  of  property  is  over- 
balanced by  some  social  action. 

The  present  economic  tendencies  will  greatly  in- 
crease the  total  amount  of  property  income  and  the 
proportion  of  property  income  paid  with  each  passing 
decade.  Land  values  will  continue  to  rise,  as  popula- 
tion grows  denser,  demand  for  land  increases,  and 
methods  of  using  land  are  perfected.  The  return  to 
capital  (the  interest  rate)  shows  every  indication  of 
advancing.  It  certainly  will  not  decrease  in  the  near 
future. 

Meanwhile  the  immortalization  of  capital  proceeds 
apace.  The  day  when  capital  could  be  easily  dissi- 
pated has  passed  away.  Accounting  systems,  insur- 


200  INCOME 

ance  devices,  depreciation  funds,  boards  of  directors, 
and  trusteeships,  conserve  capital,  reduce  risks,  dis- 
tribute dangers,  and  in  general,  provide  against  the 
misadventures  for  which  interest,  at  least  in  part,  is 
supposed  to  be  a  recompense.  When  once  created, 
capital  does  not  disappear.  Instead,  every  conceiv- 
able method  has  been  devised  to  perpetuate  it.  It  may 
even  add  to  itself,  as  it  frequently  does,  when  earnings, 
instead  of  being  used  for  the  payment  of  dividends, 
are  re-invested  and  turned  directly  into  new  capital. 

The  workers,  meanwhile,  are  living,  for  the  most 
part,  a  hand-to-mouth  existence,  successful  if  they  are 
able  to  maintain  health  and  keep  up  appearances. 
Against  the  value  of  the  products,  which  their  energy 
creates,  is  charged  the  property  incomes  for  which 
the  labor  of  someone  must  pay.  To-day,  the  pro- 
ducers of  wealth  are  saddled  with  an  enormous  prop- 
erty income  charge  which  increases  with  each  passing 
year — increases  far  faster  than  the  increase  in  the 
population;  and  which,  from  its  very  nature,  cannot 
be  reduced,  but  must  be  constantly  augmented. 

Were  there  no  protest  from  the  producers  of  wealth, 
the  future  for  capital  would  be  a  bright  one.  With 
increasing  stability,  increasing  safety,  decreasing 
risks,  an  increasing  interest  rate,  and  increasing  land 
values,  the  property  owners  might  face  a  prospect  of 
unalloyed  hopefulness. 

Actually,  no  such  situation  exists.  On  the  contrary, 
there  is  every  indication  that,  with  the  passing  years, 
the  producers  of  wealth  will  file  a  protest  of  ever  in- 
creasing volume  against  an  economic  system  which 
automatically  gives  to  those  who  already  have. 

While  the  spirit  of  protest  grows  in  intensity,  the 


PROPERTY  INCOME  AND  PRODUCERS  OF  WEALTH       2OI 

form  remains  a  matter  which  future  years  alone  may 
determine.  An  appeal  to  the  available  facts  leads  to 
the  conclusion  that  the  most  effective  protest  the  pro- 
ducers can  make  will  be  based  on  a  clear  recognition 
of  the  distinction  between  service  income  and  property 
income.  Shall  the  economic  world  decide  that  only 
those  who  expend  effort  shall  share  in  the  wealth, 
which  is  the  result  of  that  effort?  Shall  the  economic 
world  decide  that  each  person  expending  effort  is 
entitled  to  all  the  value  for  which  his  effort  is  respon- 
sible— no  more  and  no  less?  Shall  the  economic  world 
set  its  stamp  of  approval  on  effort,  and  its  stamp  of 
disapproval  on  parasitism,  by  turning  the  income  from 
activity  into  the  hands  of  workers,  and  denying  in- 
come to  all  others?  Has  the  time  arrived  when  a  few 
may  no  longer  live  in  idleness  upon  the  products 
created  by  those  who  give  their  lives  to  labor?  Shall 
not  the  social  blessing  be  bestowed  upon  those  who 
labor  and  the  social  curse  be  hurled  upon  the  idler 
and  the  wastrel?  Lo !  these  many  years  has  mankind 
looked  forward  to  a  day  when  economic  justice  could 
prevail.  Is  not  this  the  day  and  this  new  century 
the  seed-ground  for  its  fulfillment? 

Who  shall  say?  Who  but  those  who  carry  the 
burden  of  production,  and  are  bound  by  the  bonds  of 
economic  necessity  to  the  treadmill  of  toil. 

Could  the  remainder  of  the  world  view  the  world 
as  the  worker  is  forced  to  view  it,  could  the  favored 
few  look  upon  life  through  the  same  medium  of  dis- 
cipline and  stern  necessity  which  surrounds  the 
spender  of  energy,  there  would  be  but  one  answer. 
Few  indeed  are  they  who  are  sincerely  convinced  that 
justice  is  fulfilled  where  the  many  labor  and  the  few 


202  INCOME 

enjoy.    Few,  even  among  that  favored  few,  can  face 
the  facts  unmoved. 

During  these  dawning  years  of  the  twentieth  cen- 
tury, where  so  many  questions  have  been  answered, 
in  part,  and  where  so  many  issues  have  been  raised 
and  laid  to  rest  again,  men  and  women  innumerable, 
in  every  walk  of  life  have  awakened  to  a  new  realiza- 
tion of  the  realities  of  life.  Great  and  small,  they  have 
turned  aside  from  the  false  gods  of  their  youthful 
training  to  a  new  understanding  of  their  obligations 
to  mankind,  chief  among  which  stands  the  obligation 
of  creating  an  economic  world  in  which  he  who  expends 
effort  shall  be  rewarded,  while  he  who  is  unwilling  to 
enter  the  workshop  of  life  shall  receive  but  the  barest 
subsistence  which  will  hold  life  intact.  What  other 
message  save  this  one  can  the  producers  of  wealth 
dispatch  to  the  recipients  of  property  income?  All 
men  must  finally  learn  "the  immorality  and  practical 
inexpediency  of  seeking  to  acquire  wealth  by  winning 
it  from  another  rather  than  by  earning  it  by  some 
sort  of  service  to  one's  fellow  men." 


APPENDICES 

APPENDIX  I 

WAGE  RATES  Of  MALES,  1 6  YEARS  OF  AGE  AND  OVER,  IN  ALL  INDUSTRIES 
AND  IN  CERTAIN  INDUSTRIES  EMPLOYING  MORE  THAN  25,000  SUCH 
MALES,  IQOS  1 

Per  Cent.  Receiving  Wage 
Total    Rates  Per  Year  of  Less  Than 

Industry                             Employed    $250  $500    $750  $1,000 

All  industries 2,124,069        8  47         79        94 

Boots  and  Shoes 51,419        8  42        76        93 

Bread  and  Bakery  Products. .        44,322        3  30        74        96 

Carriages  and  Wagons 34,io8        6  44        82        97 

Cars  and  Shop  Construction.      162,719        3  35        73        92 

Cars,  Steam,  Railroad 28,984        8  48        81        95 

Cotton  Goods 86,023       2O  79        9^        99 

Flour  and  Grist  Mills 25,516        6  54        88        97 

Foundry  and  Machine  Shop. .      202,174        6  40        73        94 

Furniture 47,oi6        8  54        86        97 

Iron  and  Steel 96,794        3  27        85        97 

Leather 33,025        5  56        91        98 

Locomotives 23,040        5  38        74        90 

Lumber  and  Timber 114,896      12  65        90        97 

Planing  Mill  Products 40,426        8  46        76        95 

Paper  and  Wood  Pulp 28,095        5  53        88        97 

Printing     and     Publishing — 

Books  and  Journals 33,594      «  36        61        87 

Printing     and     Publishing — 

Newspapers  and  Periodicals       43,927       n  38        65        81 
Slaughtering  and  Meat  Pack- 
ing          25,961        5  36        86        98 

Tobacco  and  Cigars 38,702      n  41         78        95 

1  "Census  of  Manufactures,"  1905 — "Earnings  of  Wage  Earners." 

Washington,  Government  Printing  Office,  1908.  Tables  67  and  68. 

203 


204  APPENDIX  H 


APPENDIX  H 

WAGE  RATES  OF  FEMALES,  1 6  YEARS  OF  AGE  AND  OVER,  IN  ALL  INDUS- 
TRIES AND  IN  CERTAIN  INDUSTRIES  EMPLOYING  MORE  THAN  IO,OOO 
SUCH  FEMALES,  IQOS  1 

Per  Cent.  Receiving  Wage 

Total  Rates  Per  Year  of  Less  Than 

Industry                  Employed  $250  $500  $750  $750  and  over 

All  industries 488,832  34  92  99              i 

Boots  and  Shoes 26,033  21        77  97             3 

Men's  Clothing 24,062  32  93  99             I 

Women's  Clothing ....     21,009  26  86  98             2 

Cotton  Goods 74,036  31  96  100 

Hosiery  and  Knit  Goods    26,485  33  95  100 
Publishing  Newspapers 

and  Periodicals 10,954  38  90  97             3 

Shirts.... 10,960  41  94  99 

Silk  and  Silk  Goods ...     15,866  36  92  99 

Tobacco  and  Cigars ...     29,387  40  92  99 

Woolen  Goods 13,024  22  87  99 

Worsted  Goods 18,013  20  89  99 

1  "Census  of  Manufactures,"  1905,  op.  tit. 


APPENDIX  HI 


205 


APPENDIX  HI 


WAGES  OF  FEMALES,  1 8  YEARS  OF  AGE  AND  OVER,  IN  MASSACHUSETTS 
FOR  ALL  INDUSTRIES  REPORTING  THE  EMPLOYMENT  OF  MORE  THAN 
5,000  SUCH  FEMALES,  IQIO  l 


Industry 

All  industries 

Boots  and  Shoes 

Boots  and  Shoes, 
Rubber 

Boxes,  Fancy  and 
Paper  

Carpets  and  Rugs. .  . 

Clothing  (Men's).. . . 

Clothing  (Women's). 

Confectionery 

Corsets 

Cotton  Goods 

Electrical  Machinery 

Hats  (Straw) 

Hosiery  and  Knit 
Goods 

Jewelry 

Paper  and  Wood  Pulp 

Silk  and  Silk  Goods. 

Suspenders  and  Elas- 
tic  

Woolen  Goods 

Worsted  Good?.  . . 


Average 
Number 
Employed 

180,214 
28,559 


Total      Per  Cent.  Receiving  Wage 

Days     Rates  Per  Year  of  Less  Than 

Worked   $250    $500    $750    $1,000 


2,579 
2,455 


4,846 

3,949 

2,170 

46,843 

2,525 
2,716 

6,435 
2,883 

4,45i 
2,453 

2,020 

5,42i 

13,993 


287 
283 


3,248       280 


294 
290 
278 
280 
290 

304 
281 

297 
271 

277 
287 
274 
280 

286 
272 

269 


79 
56 


II 

83 

5 

77 

7 

83 

9 

76 

27 

94 

i6 

81 

6 

88 

8 

87 

4 

47 

12 

87 

7 

76 

6 

96 

6 

66 

6 

74 

5 

75 

2 

78 

99 
89 


77        98 


98 

100 

98 

97 
99 
99 
99 
99 
81 

99 

96 

99 
99 

96 
98 
99 


99 


99 
99 

99 
99 
99 
99 

100 

100 

92 

99 
99 

100 
100 

98 

99 
99 


1'*25th  Annual    Report   of    the   Bureau   of   Statistics,"   1910. 
Boston,  Wright  and  Potter,  1912,  p.  88. 


206  APPENDIX  IV,  V 


APPENDIX  IV 

WAGES  OF  FEMALES,  1 6  YEARS  OF  AGE  AND  OVER,  IN  NEW  JERSEY  FOR 
ALL  INDUSTRIES  AND  FOR  THOSE  INDUSTRIES  REPORTING  THE  EM- 
PLOYMENT OF  MORE  THAN  2,OOO  SUCH  FEMALES,  19 1 1  1 

Average  Total  Per  Cent.  Receiving  Wage 

Number  Days  Rates  Per  Year  of  Less  Than 

Industry               Employed  Worked  $250    $500    $750     $1,000 

All  industries 79,497  288  17        86        98           99 

Chemical  Products ...       2,193  304  19        94        99           99 

Cigars  and  Tobacco . .       7,365  293  30        94        99         100 

Corsets 2,211  301  16        80        99         100 

Cotton  Goods 5,030  289  26        94        99         100 

Lamps 4,094  285  5        80        99         100 

Silk  (Broad  Ribbon). .     12,293  2g8  n        69        95           99 

Thread 2,526  286  4        98      100 

Woolen  and  Worsteds      7,117  284  16        90        98         100 

1  "Annual  Report  of  the  Bureau  of  Statistics,"  1911.     Camden, 
1912,  pp.  77-121. 

APPENDIX  V 

WAGES  OF  FEMALES,  1 6  YEARS  AND  OVER,  IN  OKLAHOMA,  ENGAGED  IN 
ALL  INDUSTRIES,  1911  * 

Per  Cent.  Receiving  Wage 
Total      Rates  Per  Year  of  Less  Than 

Industry                            Employed    $250    $500    $750  $1,000 
All  industries 1,369          8        84        97        99 

1  "Annual  Report  of  the  Department  of  Labor,"  Oklahoma,  1911- 
12.    Warden  Print.,  Oklahoma  City,  pp.  160-161. 


APPENDIX  VT,   VH 


2O7 


APPENDIX  VI 

WAGES  OF  FEMALES,  1 6  YEARS  OP  AGE  AND  OVER,  IN  KANSAS  FOR  ALL 
INDUSTRIES  REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  IOO  ADULT 
FEMALES  1 

Average 
Number 


Per  Cent.  Receiving  Wage  Rales 
Per  Year  of  Less  Than 


Industry                   E 
All  industries  

Employed 
3,599 

957 
146 

773 

$250 
25 

21 
36 

6 

$500 
88 

89 

IOO 

75 

£750 
98 

97 
(bet.  10 
and  12) 

(under  15) 
98 

Bookbinding  and 
Printing  

Glass  

Slaughtering  and  Meat 
Packing  

$1,000 


IOO 


Soap. 


153 


6a      loo      (only  6  over  7) 


'Annual  Report  of  the  Bureau  of  Labor,  "1909,  pp.  77-82. 


APPENDIX  VH 


WAGES  OF  FEMALES,  1 6  YEARS  AND  OVER, 
TRIES  AND  IN  INDUSTRIES  REPORTING 
THAN  1,000  FEMALES  1909  1 

Total 
Industry  Employed 

All  industries 24,677 

Boots  and  Shoes i,7?6 

Men's  Clothing 2,966 

Knit  Goods 3,400 

Laundries 1,019 


IN  WISCONSIN,  IN  ALL  INDUS- 
THE  EMPLOYMENT  OF  MORE 

Per  Cent.  Receiving  Wage 
Rates  Per  Year  of  Less  Than 
$250    $500    $750   $1,000 
32        93        98        99 


28 

14 
ii 


85 
88 

93 
86 


98 
99 
99 
99 


99 
99 

IOO 
IOO 


1  "Biennial  Report  of  the  Bureau  of  Labor  Statistics  of  Wiscon- 
sin."   Madison,  1911. 


208  APPENDIX   VIII,   IX 


APPENDIX  VIII 

WAGES  OF  FEMALES  IN  CALIFORNIA,  IN  MANUFACTURING  ESTABLISH- 
MENTS, IN   1911  1 

Per  Cent.  Receiving  Wage 

Total        Rates  Per  Year  of  Less  Than 

Employed      $250    $500    $750  $1,000 

San  Francisco 8,742  7         40        85        97 

Los  Angeles 5,604  8         48        89        98 

1  Compiled  from  the  Statistical  Tables  of  the  Biennial  Report  of 
the  California  Bureau  of  Labor  Statistics,  1911-12.  Sacramento, 
1912. 


APPENDIX  IX 

WAGES  OF  FEMALES  IN  CALIFORNIA,  IN  ALL  ESTABLISHMENTS  IN  CITIES 
REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  I,OOO  FEMALES,  191 1  1 

Per  Cent.  Receiving  Wage 

Total  Rates  Per  Year  of  Less  Than 

Employed  $250    $500    $750    $1,000 

San  Francisco 16,087  7        34        78         95 

Los  Angeles 11,911  i°        41        83         97 

Oakland 2,834  n        52        87         97 

Sacramento i>335  18        48        84         93 

San  Diego 1,006  9        50        85         98 

Summary  for  State.  ...    37,204  40        82        97         97 

1  Compiled  from  the  Statistical  Tables  of  the  Biennial  Report  of  the 
California  Bureau  of  Labor  Statistics,  1911-12.    Sacramento,  1912. 


APPENDIX  X  209 

APPENDIX  X 

INCOME  OP  WAGE-EARNERS — RAILROADS  1 

All  Operating  Roads — 1911  * 

Eastern  Southern  Western  United 

Class  of  Employees                District  District  District  States 

Station  men 1.97  1.61  i.gi  1.89 

Enginemen 4.71  4.85  4.90  4.79 

Firemen 2.88  2.57  3.22  2.94 

Conductors 4.03  4.00  4.46  4.16 

Other  trainmen 2 . 94  2 . 43  3 .  oo  2 . 88 

Machinists 2.98  3.09  3.47  3. 14 

Carpenters 2.60  2.37  2.56  2.54 

Other  shopmen 2.29  1.98  2.31  2.24 

Other  trackmen 1.63  1.21  1.49  1.50 

Switch   tenders,    crossing   tenders, 

and  watchmen 1.75  1.48  1.85  1.74 

Employees  —  account         floating 

equipment 2.34  1.97  2.42  2.34 

All  other  employees  and  laborers ..    2.08  1.88  2.18  2.08 

1  "Statistics  of  Railways  in  the  United  States,"  1911,  Interstate 
Commerce  Commission.    Washington,  Government  Printing  Office, 

13- 

*  Does  not  include  returns  for  switching  and  terminal  companies. 


2IO 


APPENDIX   XI 


APPENDIX  XI 


AVERAGE  ANNUAL  AND  AVERAGE  HOURLY  EARNINGS  OF  WOMEN  WAGE- 
EARNERS  INVESTIGATED  IN  RETAIL  STORES,  CLASSIFIED  BY  WEEKLY 
EARNINGS  l 

Women  who  Worked 

Throughout  the  Year  All  Women 

Number  Annual      Number 


Average  Weekly 

Reporting 

Average 

Earnings 

Reporting 

Average 

Earnings 

Annual 

Annual 

Divided 

Hourly 

Hourly 

(Wage  Group) 

Earnings 

Earnings 

by  52 

Earnings 

Earnings 

Under  $3.00  

18 

$138.  17 

$2.66 

1  20 

$0.03 

$3.00  —  $3.40  .  . 

73 

167  .  30 

3  .  22 

272 

•w^j 
.05 

$3.50  —  $3.99 

80 

i    o 

189.48 

•j 
3.64 

231 

*  w  J 

.07 

$4.00  —  $4.49 

7° 

213.  6s 

4-II 

186 

.07 

$4.  so  —  $4.00  . 

QS 

<j     j 

241  .  21 

4.64 

27S 

.08 

$5.00  —  $5.49 

57 

248.57 

*r       ^ 
4.78 

*  «j 
21$ 

.09 

$5-50—  $5-99--  •  • 

271 

293.42 

5-64 

620 

.09 

$6.00  —  $6.49  .... 

•      145 

271.22 

5-22 

310 

.09 

$6.50—16.99  

260 

346.47 

6.66 

503 

.10 

$7.00  —  $7.49  

130 

367.58 

7.07 

259 

.10 

$7-5°  —  $7-99  

192 

393-02 

7-56 

332 

.11 

$8.00—  $8.99  

00 

421.68 

8.  ii 

160 

•13 

$9.00  —  $9.99  

19 

470.91 

9.10 

33 

-IS 

$10.00  —  $11.99.  •  • 

28 

562.2O 

10.81 

44 

.21 

$12.00  —  and  over.  .          5 

702.76 

I3-5I 

12 

.27 

for  all 1,533       $313.26 


3,761 


$0.08 


1  "Massachusetts  Report  of  the  Commission  on  Minimum  Wage 
Boards,"  January,  191 2,  House  No.  1697.  Wright  &  Potter  Company, 
Boston,  1912  (p.  286). 


APPENDIX  XII  211 


APPENDIX  XH 

PER  CENT.  OF  EMPLOYEES  EARNING  EACH  CLASSIFIED  AMOUNT  DURING  WEEK,  BY  SEX 
AND  AGE  GROUPS — WOOLEN  AND  WORSTED  MILLS  AND  COTTON  MILLS  1 

Employees  Per  Cent,  of  Employees  Earning 

Per  Cent.  each  Classified  Amount  During 

Working  Average  Week 

Less  Than  Amount 

56  Hours  Earned  $12 

During   During  Under  Under  Under  Under  and 

Sex  and  Age  Groups  Total    Week       Week  $5       $7        $10      $12    over 

Males,  18  yrs.  and  over      11,075      19.8      $10.20  5.0    17.3    56-4    69.8  30.2 

Males,  under  18  yrs 1,075      20.8          6.02  12.3    80.2    98.8    99.7       .3 


Total  . 

12,150 

IQ 

fo 

s- 

5  6 

60   2 

Females, 

1  8  yrs.  and  over 

8,320 

26 

.1 

7 

.67 

8.7 

40.4 

86.5 

94*3 

5.7 

Females, 

under  18  yrs  ... 

1,452 

2Q 

8 

6 

02 

17-6 

77-1 

98.3 

QQ-7 

•  3 

Total. 

9,772 

10 

AC     g 

88  2 

Grand  Total 21,922      22.9        $8.76      7.6    33.2    72.7    85.2   17.5 

1  "Report  on  Strike  of  Textile  Workers  in  Lawrence,  Mass.,"  in  1912;  Senate  Docu- 
ment, No.  870,  62d  Congress,  zd  Session.  Washington,  Government  Printing  Office, 
1912,  p.  74. 


212  APPENDIX   XIII 


APPENDIX 

WAGES  OF  MALES,  18  YEARS  OF  AGE  AND  OVER,  IN  MASSACHUSETTS  FOR 
ALL  INDUSTRIES  REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  S,OOO 
SUCH  MALES  l 

Average  Total  Per  Cent.  Receiving  Wage 

Number  Days  Rates  of  Less  Than 

Industry             Employed  Worked  $250    $500  $750  $1,000 

All  industries 420,524  287  i  34  7*  9* 

Boots  and  Shoes 54,896  283  2  22  55  82 

Cotton  Goods 56,235  281  3  63  93  97 

Dyeing  and  Finishing 

Textiles 7,5*5  284  64  88  94 

Electrical  Machinery.  .     13,364  297  i  21  59  89 
Foundry  and  Machine 

Shop 45,209  296  i  28  66  92 

Furniture 7,167  295  i  36  77  94 

Jewelry 5,577  287  i  23  54  80 

Leather 12,296  282  i  40  80  96 

Paper  and  Wool  Pulp         9,322  274  i  33  82  96 

Woolen  Goods 10,804  272  2  50  88  97 

Worsted  Goods 19,153  269  50  85  92 

1 "  25th  Annual  Report  of  the  Bureau  of  Statistics,"  1910.    Boston, 
Wright  and  Potter,  1912,  p.  88. 


APPENDIX   XIV  213 


APPENDIX  XIV 

WAGES  OF  MALES,  l6  YEARS  OF  AGE  AND  OVER,  IN  NEW  JERSEY  FOR 
ALL  INDUSTRIES  REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  S,OOO 
SUCH  MALES,  IQII  1 

Average      Total     Per  Cent.  Receiving  Wage 
Number      Days          Rates  of  Less  Than 
Industry  Employed  Worked  $250    $500    $750    $1,000 

All  industries 243,753 

Chemical  Products. . . .  6,736 

Scientific  Instruments.  5,747 

Electrical  Appliances.  .  7,288 

Iron  Foundries 9,49° 

Glass 7,723 

Leather 6,421 

Machinery 23,575 

Oils 8,067 

Metal  Goods 7,344 

Rubber  Goods 7,873 

Shipbuilding 5,94° 

Silk  (Broad  Ribbon) . .  11,996 

Silk  Dyeing 5,746 

Woolen   and   Worsted 

Goods 6,801        284         4         55        85         94 

1  "Annual  Report  of  the  Bureau  of  Statistics,"  1911.     Camden, 
1912,  pp.  77-121. 


214  APPENDIX   XV,   XVI 


APPENDIX  XV 

WAGE  RATES  OF  MALE  WAGE-EARNERS,  l6  YEARS  OF  AGE  AND  OVER 
EMPLOYED  IN  ALL  INDUSTRIES  OF  OKLAHOMA  AND  IN  THOSE  INDUS- 
TRIES REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  I,OOO  MALES, 
IQII  l 

Wage  Rales  Per  Year  of 

Total  Less  Than 

Industries                       Employed  $250    $500  $750  $1,000 

All  Industries 17,007  i         17  68  90 

Cotton  Oil 1,484  37  94  99 

Machine  Shops 2,747  i         12  63  84 

Publishing  and  Printing 1,074  7         21  50  75 

Packing  Plant 1,288  10  74  94 

1  "Annual  Report  of  the  Department  of  Labor,  Oklahoma,"  1911- 
12.    Warden  Print.,  Oklahoma  City,  pp.  158-9. 

APPENDIX  XVI 

WAGES  OF  MALES,  l6  YEARS  OF  AGE  AND  OVER,  IN  KANSAS  FOR  ALL 
INDUSTRIES  REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  I,OOO  SUCH 
MALES,  1911  1 

Average  Per  Cent.   Receiving  Wage 

Number  Rates  Per  Year  of  Less  Than 

Industries                       Employed  $250    $500    $750   $1,000 

All  industries 50,720  2         26        70         91 

Bookbinding  and  Printing ....     1,723  8         30        55         80 

Brick  and  Tile i?957  36        86         96 

Cars  and  Shop  Construction. .     7,552  32        74         92 

Cement 2,168  2         n        68         91 

Coal  Mining 7,375  3         16        46         78 

Flour  and  Grist  Mills 2,223  7         26        79         94 

Foundries  and  Machine  Shops    2,503  2         23        72         92 

Glass  Factories 1,862  27        55         72 

Smelting  and  Refining 2,616  a           9        69         95 

Slaughtering  and  Meat  Pack- 
ing    10,913  i         37        84         96 

1  "Annual  Report  of  the  Bureau  of  Labor,"  1909,  pp.  77-82. 


APPENDIX   XVII,   XVIII  215 


APPENDIX  XVII 

WAGE  RATES  OP  MALES  IN  WISCONSIN,  IN  ALL  INDUSTRIES  AND  IN  IN- 
DUSTRIES REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  S,OOO  MALES, 
1909  l 

Per  Cent,  of  Wage  Rales  Per 
Total  Year  of  Less  Than 

Industry  Employed  $250  $500  $750  $1,000  $1,500 

All  industries 141,218       2       32      77       94        99 

Iron 7,445        i       34      71        92        99 

Leather 7,i88       i       13      85       98        99 

Light,  Water  and  Power.  .  .       5,730       i       16      90       97        99 

Lumber 15,103  6      87       96        98 

Machinery 13,806       i         6      58       87        99 

Paper  and  Pulp 6,051        i        7      88       96        99 

1  "Biennial  Report  of  the  Bureau  of  Labor  Statistics  of  Wiscon- 
sin."   Madison,  1911. 


APPENDIX  XVin 

WAGE  RATES  OF  MALES  IN  MANUFACTURING  ESTABLISHMENTS  IN  CALI- 
FORNIA,  1911  1 

Per  Cent.  Receiving  Wage  Rates  of  Less 
Total  Than 

Employed  $250  $500  $750  $1,000  $1,000  and  over 

San  Francisco 28,170        i        6       28       56  44 

Los  Angeles 23,521        I        7       36       72  28 


2l6  APPENDIX   XIX 


APPENDIX  XIX 

WAGE  RATES  OF  MALES  IN  ALL  ESTABLISHMENTS  IN  CITIES  OF  CALI- 
FORNIA, REPORTING  THE  EMPLOYMENT  OF  MORE  THAN  2,OOO  MALES, 
IQII  1 

Per  Cent.  Receiving  Wage  Rales  of  Less 
Total  Than 

Employed  $250  $500  $750  $1,000  $1,000  and  over 
San  Francisco.  .  .  .     44,079        i        7       26       54  46 

Los  Angeles 36,450        i        8       36       71  29 

Oakland 6,934        3        8       26       60  40 

Sacramento 3,327        3        8       23       59  41 

San  Diego 2,626        3        7       25       73  27 

Summary    for 
State 107,950        2        7       30       63  37 

Compiled  from  the  Statistical  Tables,  "Biennial  Report  of  the 
California  Bureau  of  Labor  Statistics,"  1911-12.    Sacramento,  1912. 


APPENDIX   XX 


2I7 


APPENDIX  XX 


ESTABLISHMENTS,   WAGE-EARNERS,   AND  PER  CENT.   OF  TOTAL  1 


of 


No.  of  Avg.  No. 
Establish-  of  Wage- 
Establishments  Employing  ments  earners 

Total 268,491  6,615,046 

No  wage-earners 27,712 

i  to  5  wage-earners 136,289  311,704 

6  to  20  wage-earners 57, 198  640,793 

21  to  50  wage-earners 23,544  764,408 

51  to  zoo  wage-earners 10,964  782,298 

101  to  250  wage-earners 8,116  1,258,639 

251  to  500  wage-earners 2,905  1,006,457 

501  to  1,000  wage-earners 1*223  837,473 

Over  1,000  wage-earners 540  1,013,274 


Per    Cent. 
Total 
Estab- 
lish-     Wage- 
ments  Earners 


100.0 

10.3 

50.8 

21.3 

8.8 


i.i 
0-5 

0.2 


IOO.O 

4-7 

9-7 

ii. 6 

ii. 8 

19.0 

iS-2 
12.7 

15-3 


1  Abstract  of  the  Census,  1910,  Department  of  Commerce  and 
Labor,  Bureau  of  the  Census.  Washington,  Government  Printing 
Office,  1913,  p.  468. 


218 


APPENDIX   XXI 


APPENDIX  XXI 

COMPARATIVE  SUMMARY  OF  RAILWAY  EMPLOYEES,  BY  CLASS  AND  PER 
100  *    MILES  OF  LINE  OPERATED,   IQOI  AND  IQIO 


Total  United  States 

Total  United  States 

jp/o2 

igoi 

Per  100 

Per  100 

Miles 

Miles 

Class  of  Employees 

Number  of  Line 

Number 

of  Line 

General  officers  

5,476           2 

4,780 

2 

Other  officers  

9,392           4 

4,923 

3 

General  office  clerks  

76,329         32 

34,778 

18 

Station  agents  

37,379          16 

32,294 

17 

Other  station  men  

153,104         64 

94,847 

49 

Enginemen  

64,691          27 

45,292 

23 

Firemen  

68,321          28 

47,i66 

24 

Conductors  

48,682          20 

32,092 

16 

Other  trainmen  

136,938         57 

84,493 

43 

Machinists  

55,193          23 

34,698 

18 

Carpenters  

68,085          28 

48,946 

25 

Other  shopmen  

225,196         94 

120,550 

62 

Section  foremen  

44,207         18 

33,8i7 

17 

Other  trackmen  

378,955       157 

239,166 

122 

Switch    tenders,    crossing 

tenders,  and  watchmen  . 

44,682         19 

47,576 

24 

Telegraph    operators    and 

dispatchers  

42,435         18 

26,606 

14 

Employees  —  account  float- 

ing equipment  

io,549           4 

7,423 

4 

All  other  employees  and 

laborers  

229,806         95 

131,722 

67 

Total 1,699,420       706        1,071,169       548 

1  "Twenty-fourth  Annual  Report  on  the  Statistics  of  Railways  in 
the  United  States,"  for  the  Year  Ended  June  30,  1911,  Interstate 
Commerce  Commission.    Washington,  Government  Printing  Office, 
1913,  p.  27. 

2  Does  not  include  returns  for  switching  and  terminal  companies. 


APPENDIX  XXH  219 


APPENDIX 

PER  CENT.  Or  TOTAL  RECEIPTS  OF  UNITED  STATES  STEEL  CORPORATION  CHARGED 
TO  EACH  ITEM  OF  EXPENSE  AND  PROFIT,  igO3  TO  IQII  * 

(Compiled  from  Annual  Reports  of  the   U.    S.   Steel    Corporation) 


Per  Cent,  of  Total  Receipts  of 
Interest  on 
Bonds,  and 
Other  Manu-                  Depreciation, 

Total 

Wages  facturing  and 

Replacement, 

Receipts,  att 

and 

Operating 

General 

and  Sinking 

Divi- 

Sur- 

Year 

Sources 

Salaries 

Expenses 

Expenses 

Funds 

dends 

plus 

igoz  .... 

$569,065,902 

21.2 

Si-  1 

3.2 

8.6 

9-9 

6.0 

1903  

541,841,465 

22.3 

53-a 

3-1 

n.  i 

8.0 

2-3 

1904  

448,162,380 

22.3 

56.6 

3-6 

10.8 

5-6 

I.I 

1905  

59Il388,87o 

21.7 

S2-7 

3-1 

10.  9 

4-3 

7-3 

1906.  .  .. 

705,916,790 

20.Q 

53-3 

3-3 

9.6 

5-0 

8.9 

1907  

766,763,718 

21.  0 

S3.  6 

3-3 

o-S 

4.6 

9.0 

1908  

488,094,725 

24-7 

S°-6 

4-3 

II.  O 

7-3 

2.1 

1909  

653,200,250 

23.3 

50.8 

4-3 

9.6 

7.0 

5-i 

1910  

709,814,593 

34.7 

49-9 

4.2 

8.9 

7-i 

5-2 

igii.  ... 

618,911,430 

26.1 

S3.8 

4.8 

7-4 

8.2 

0.7 

Average 

1902-1911  $609,316,012 

22.7 

S3.  3 

3-7 

9-7 

6.6 

S-i 

1 "  Report  on  Conditions  of  Employment  in  the  Iron  and  Steel  Industry  in  the 
United  States,"  U.  S.  Bureau  of  Labor,  1912,  Volume  III.  Washington,  Govern- 
ment Printing  Office,  1913,  p.  374. 


22O 


APPENDIX    XXIII 


APPENDIX  XXin 


TOTAL  EXPENDITURES  OF  UNITED  STATES  STEEL  CORPORATION  FOR 
WAGES  AND  SALARIES  DURING  EACH  YEAR  AND  BALANCE  OF  UN- 
DIVIDED SURPLUS  IN  EACH  YEAR  AFTER  PAYMENT  OF  DIVmENDS  1 

(Compiled  from  Annual  Reports  of  the  U.  S.  Steel  Corporation) 


Total  Wages 
and  Salaries 
Paid  During 
Year  Year 

1902 $120,528,343 

1903 120,763,891 

1904 99,778,276 

1905 128,052,955 

1906 147,765,540 

1907 160,825,822 

1908 120,570,829 

1909 151,663,394 

191° 174,955,139 

1911 161,419,031 


Balance  of  Un- 
divided Sur- 
plus, Dec.  31 

$77,874,597 
66,096,682 

61,365,446 

84,738,451 

97,720,714 

122,645,244 

133,415,214 
151,354,528 
164,143,158 
156,274,795 


Per  Cent,  which  Un- 
divided Surplus  is 
of  Wages  and 
Salaries 
64.6 
54-7 
61.5 
66.2 
66.1 

76.3 
110.7 
99.8 
93-8 
96.8 


^'Report  on  Conditions  of  Employment  in  the  Iron  and  Steel 
Industry  in  the  United  States,"  Volume  III,  U.  S.  Bureau  of  Labor, 
1912.  Washington,  Government  Printing  Office,  1913,  p.  277. 


APPENDIX  XXIV 


221 


APPENDIX  XXIV 

PRODUCT  AND    WAGES   PAID   FOR  THOSE   MASSACHUSETTS   INDUSTRIES    REPORTING   A 
PRODUCT  VALUED  AT  JlO.OOO.OOO  OR  OVER  IN  1910 l 

Per    Cent. 
Value         of  Wages 

Capital  Value  of         Added  by     to  Value  of 

Industry  Invested  Product       Manufacture    Product 

The  State 1,194,442,498  1,465,749,310    60,367,444  20 

Boot  and  shoe  cut  stock 10,954,526       28,840,119      4,823,965  6 

Boot  and  shoe  findings 6,151,864        16,322,052 

Boots  and  shoes 75,622,688      190,856,515 


17,020,521 


4,695,681 
75,232,029 
10,730,327 


7,365,272        23,716,640      9,960,465 


".523,799 
7,266,575 
4,055,709 
7,481,279 

229,616,129 

30,961,756 

13,031,615 
15,627,158 
11,714,278 
16,018,877 
191,118,340 
20,239,712 

4,495,633 
6,408,433 
5,061,713 
6,228,368 
70,210,491 
8,876,823 

23,391,661 

32,036,393 

15,683,862 

84,830,525 
18,205,891 
11,450,709 

77,665,761 
13,060,508 
14,237,71? 

49,383,381 
7,255,368 
6,339,930 

12,194,109 
14,426,918 

12,670,839 
15,898,425 

3,542,983 
9,891,010 

38,623,608 

21,112,945 
43,213,739 

41,544,425 
13,968,270 
43,020,325 

11,197,666 
9,539,497 
17,150,556 

7,374,601 

10,070,888 

6,461,073 

12,560,594 

21,643,136 

5,573,530 

14,167,146 
27,186,489 
96,433,967 

34,564,127 
31,264,304 
89,395,948 

2,708,823 
12,262,745 
33,453,320 

23 
16 


Boots  and  shoes,  rubber 

Bread  and  other  bakery  prod- 
ucts   

Carpets  and  rugs,  other  than 
rag 

Clothing,  men's 

Clothing,  women's 

Confectionery 

Cotton  goods 229,616,129 

Dyeing  and  finishing  textiles . . 

Electrical  machinery,  appara- 
tus, and  supplies 

Foundry  and  machine  shop 
products 

Furniture 

Hosiery  and  knit  goods 

Iron  and  steel,  steel  works  and 
rolling  mills 

Jewelry 

Leather,  tanned,  curried,  and 
finished 

Liquors,  malt 

Paper  and  wood  pulp 

Printing  and  publishing,  book 
and  job 

Rubber  goods,  not  elsewhere 
specified 

Slaughtering  and  meat  pack- 
ing, wholesale 

Woolen  goods 

Worsted  goods 

1"25th  Annual  Report  on  the  Statistics  of  Manufactures  for  the  Year  1910," 
Bureau  of  Statistics.    Boston,  Wright  &  Potter  Co.,  1912,  pp.  2-12. 


16 


34 
31 
26 

17 
29 

13 
ii 
IS 

31 


16 


INDEX 

Accounting,  and  property  income,  no. 

Modern,  and  income  distribution,  52. 

Modern,  and  income  facts,  30. 

Modern,  and  service  income,  180. 
Agriculture,  as  a  business  investment,  118. 
Average  annual  earnings,  females,  retail  stores,  210. 

Bonds,  and  property  income,  114. 

Business  accounting,  Applied  to  service  income,  179. 

Illustrated,  United  States  Steel  Corporation, 

178. 

Methods  of,  177. 

receipts,  as  a  basis  for  property  income,  134. 
stability  and  property  income,  in. 

Cannan,  Edwin,  Quoted,  xix. 
Capital,  Immortalization  of,  199. 
Monopoly  power  of,  14. 
stock,  Relation  of  dividends  to,  141. 
Chapin,  R.  C.,  Quoted,  175. 
Classified  wages.    See  Wage  Rates. 
Clerks,  Incomes  of,  78. 

Incomes  of,  municipal  utilities,  80. 
railroad  industry,  78. 
summarized,  81. 
telephone  industry,  79. 
Coal  mining,  Wages  in,  103. 

Compensation,  Distribution  of,  wages  and  salaries,  71. 
of  officers,  72. 

ratio  for  salaries  and  wages,  74. 
subordinate  officers,  rates  of,  76. 
223 


224  INDEX 

Consumer  and  income,  8. 

Corporate  organization  and  income  distribution,  115. 
and  modern  industry,  117. 
and  property  income,  112. 
and  property  income  permanence,  166. 
securities  and  income  values,  117. 

as  measures  of  property  valuation,  114. 
values,  Total  of,  detailed,  140. 

Totals  of  United  States,  138. 
wealth,  Totals  of,  124. 
Corporation  accounting,  Value  of  for  income  facts,  113. 

tax  returns  as  a  basis  for  property  income  computation, 

138. 

Detailed,  140. 
Summary  of,  147. 
Supplements  to,  148. 

Distribution,  Facts  of,  24. 

and  distributive  shares,  18. 
New  classification  in,  22. 
New  terminology  for,  25. 
of  occupations,  Organized  industry,  63. 
Participants  in,  16. 
Proportions  in,  28. 
Sharers  in,  17. 
Shares  in,  27. 

Distributive  shares  and  the  facts  of  distribution,  18. 
Classification  of,  136. 
Historical  justification  of,  18. 
Necessity  for  new  classification,  22. 
New  classification  of,  17,  18. 
values,  Sources  of,  17. 
Dividend  payments,  Detailed  estimate  of,  146. 

Estimated,  for  financial  institutions,  141. 
for  industrial  corporations,  143. 
for  public  utilities,  142. 
Estimates  of,  141. 

Dividends,  Relation  of  to  capital  stock,  141. 
net  income,  144. 


INDEX  225 

Economic  conflict  in  the  United  States,  Development  of,  192. 
inadequacy  of  service  income,  181. 
parasitism,  Absence  of  necessity  for,  20. 
Basis  for,  19. 
Modern  basis  for,  195. 
And  opportunity,  20. 
Prevalence  of,  19. 
wealth,  Sources  of,  10. 
Effort  and  income,  New  relation  of,  19. 
and  reward,  21. 
Necessity  for  stimulus  to,  21. 
Relation  of  to  income,  i,  19. 
Express  Companies,  Service  and  property  income  of,  36. 

Farm  renting  and  property  income,  118. 

valuation,  increasing  stability  in,  118. 

values,  Measurement  of,  119. 
Fetter,  F.  A.,  Quoted,  xii. 

Feudal  System,  and  property  income  values,  167. 
Final  income,  xiii. 
Fisher,  Irving,  Quoted,  xiii. 
Foremen,  Incomes  of,  75. 

Gainful  occupations,  Analysis  of,  55. 

Summary  of,  54. 
Gainfully  occupied  persons,  Analysis  of  by  class  of  work,  57. 

Classified  by  character  of  occupation,  58. 
Goods  and  services  as  income,  xi. 

Measure  of,  xiv. 

Hourly  wage  rates  classified.    See  Wage  Rates. 

Income,  Adequacy  of,  xxii. 

and  book-keeping,  rvi. 
effort,  19,  21. 

Early  relation  between,  2. 
and  labor,  8. 
and  landlordism,  2. 

p?wer,  n. 


226  INDEX 

Income  and  ownership,  9. 

and  living  standards,  xxi. 

and  the  consumer,  8. 

and  wages,  xxi. 

Apportionment  of,  the  problem  stated,  136. 

As  a  continuous  stream,  xix. 

As  purchasing  power,  xvi. 

Common  meaning  of,  xviii. 

Definition  of,  xiL 

Distinguished  from  gross  receipts,  xx. 

Distribution  of  service  income,  70. 

United  States  Steel  Corporation,  219. 
distribution,  of  manufacturing  industries,  45. 

And  modern  accounting,  52. 

Between  salary  and  wage-earners,  71. 

Bridge  companies,  38. 

Calumet  and  Hecla  Company,  49. 

Clerks,  78. 

Effect  of  corporate  organization  on,  115. 

For  certain  railroads,  34. 

For  service  and  property,  summary,  51. 

For  specific  industries,  43,  47. 

Iron  and  steel  industry,  41. 

Manufacturing  industries,  40. 

in  certain  States,  44. 

Mining,  smelting,  and  refining,  48. 

Municipal  utilities,  38. 

Pullman  Company,  46. 

Railroads,  31. 

Ratio  of,  51. 

Ratio  of  salaries  and  wages,  73. 

Service  income,  70. 

Subordinate  officers,  75. 

Terminal  companies,  37. 

Wage-earners,  glass  industry,  95. 

In  certain  States,  98. 
Iron  and  steel  industry,  89. 
Meat-packing  industry,  96. 
Mercantile  industry,  86. 


INDEX  227 

Income  distribution,  Wage-earners,  Mines  and  quarries,  102. 

Organized  industry,  105. 
Paper  industry,  94. 
Public  utilities,  101. 
Special    manufacturing    indus- 
tries, 88. 

Textile  industries,  91. 
Transportation  and  commerce, 

82. 

Factors  in,  xvii. 

Facts  and  corporation  accounting,  113. 
Difficulty  of  securing,  27. 
Importance  of,  26. 
Need  of,  xiv. 
New  relation  of,  23. 
from  property  ownership,  18. 

Service,  18. 

Goods  and  services  as,  xv. 
Labor,  monopoly  power  and,  15. 
Limitations  on,  xviii. 
Maintenance  of  property  unimpaired,  rs. 
Money  as,  3. 
Of  managers,  75. 

"Participation"  as  an  explanation  of,  12. 
Presence  of  population  and,  13. 
Problem,  and  land  value,  156. 
Importunity  of,  155. 
Productivity  as  a  measure  of,  12. 
Question  of,  i. 
Reasons  for  paying,  17. 
Relation  to  effort,  i. 
Sources,  Illustration  of,  6. 
Sources  of,  i,  4. 
Subjective  factors  in,  xii. 
Substantial  accuracy  of,  xix. 
The  basic  question,  xxiii. 
Theoretical  aspects  of,  xiii. 
Values  and  scarcity,  14. 

In  property,  immortality  of,  167. 


228  INDEX 

Income,  Values,  Relation  of  to  corporate  securities,  117. 

Sources  of,  18. 
Yielding  property,  131. 

Failure  to  pay  returns  on,  131. 
Estimates  of  total,  125. 
Immortality  of,  167. 
Increase  of  total,  157. 
Increase  of  in  the  United  States,  157. 
Total  of,  121. 
of  clerks,  78. 

Summarized,  81. 
foremen,  75. 
general  officers,  72. 
under  officers,  75. 
wage-earners,  Glass  industry,  95. 

In  certain  States,  98. 

Iron  and  steel  industry,  89. 

Meat-packing  industry,  96. 

Mercantile  industry,  86. 

Mines  and  quarries,  102. 

Organized  industry,  105. 

Paper  industry,  94. 

Public  utilities,  101. 

Special  manufacturing  industries,  88. 

Textile  industries,  91. 

Transportation  and  commerce,  82. 

data  for,  83. 
Industrial  burdens,  Borne  by  labor,  160. 

crises,  Effects  of  on  property  income,  163. 
establishments,  Numbers  of  wage-earners  employed  by,  217. 
growth,  Tendencies  of,  67. 
system,  Evolution  of  and  property  income,  161. 
values,  Destination  of,  136. 
Industry,  Modern,  and  income,  4. 
Interest,  a  fixed  charge,  160. 
and  income,  10. 
Monopoly  power  and,  14. 
rate,  Increase  of  and  the  income  problem,  158. 
Iron  and  steel  business,  Service  and  property  income  in,  41. 


INDEX  229 

Kennedy,  J.  C.,  Quoted,  96,  175. 

Labor  and  income,  8. 

exacting  nature  of,  171. 

Monopoly  power  of,  15. 

organization,  Monopoly  power  of,  16. 
Land  ownership,  Monopoly  power  of,  1 2. 

values  and  property  income  permanence,  165. 

Increase  of  and  the  income  problem,  156. 
Increase  of  in  certain  instances,  156. 
Landlordism  and  income,  2. 

Large-scale  production,  Extent  of  in  manufacturing,  61. 
Living  standards  and  service  income,  174. 

Managers,  Incomes  of,  75. 
Manufacture,  Large-scale  production  in,  61. 
Manufactures,  Products  of  income  distribution,  43. 
Manufacturing  industries,  Service  and  property  income  in,  40. 

Wages  in,  summarized,  100. 

Mining,  smelting  and  refining,  Income  distribution  in,  48. 
Modern  industry,  Effects  of  on  the  income  problem,  155. 

Rigidity  of  and  service  income,  183. 
Money  as  income,  3. 

Relation  of  to  income,  n. 
Monopoly  power  and  capital,  14. 

and  labor  income,  15. 

and  land  ownership,  12. 

as  a  source  of  income,  n. 

of  ownership,  n. 
Municipal  utilities,  Service  and  property  income  in,  38. 

Natural  resources  and  income,  10. 

Net  income,  Relation  of  dividends  to,  144. 

Non-corporate  business,  Estimates  of,  124. 

Objective  income,  xiii. 
Occupations,  Analysis  of,  55. 

Classes  of  workers,  organized  industry,  64,  65. 

Classified,  55. 


230  INDEX 

Occupations,  Distribution  of,  organized  industry,  63. 
Gainful,  summary  of,  54. 
Statement  of  and  service  income,  53. 
Summary  of,  59. 

Officers,  Subordinate,  incomes  of,  75. 
Incomes  of,  71. 
Salaries  of,  71. 
One-man  business,  Disappearance  of,  and  property  income,  in. 

Nature  of,  60. 

Opportunity  and  Western  civilization,  20. 
Organized  industry,  Classes  of  workers  in,  64. 

Detailed  group  of  persons  in,  65. 
Distribution  of  occupations  in,  63. 

In  detail,  65. 
In  mining,  66. 
In  railroads,  66. 
Effective  corporations  on,  112. 
Prevalence  of,  62. 
Tendency  toward,  62. 
Types  of  workers  in,  63. 
Wages  in.    See  Wage  Rates. 
Ownership  and  income,  9. 

as  a  source  of  income,  108. 
Monopoly  power  of,  n. 

Parasitism,  Economic,  Prevalence  of,  19. 
Permanence  of  property  income,  165. 
Persons  gainfully  occupied,  Groups  of,  55. 
Population,  Growth  of  and  property  income,  197. 

Presence  of  and  income,  13. 
Producers,  Compensation  of  and  service  income,  170. 

Tendency  of  to  protest,  200. 

Product  and  wages  of  certain  Massachusetts  industries,  221. 
Production  and  income,  10. 
Productivity  and  income,  1 2. 
Property  and  service  income.    See  Service  and  Property  Income. 

As  a  source  of  income,  108. 

Estimates  of  total,  125,  126. 

Income,  24. 


INDEX  231 

Property  and  service  income,  Facts,  accessibility  of,  133. 
Actual,  131. 

Actual  values  yielding,  128. 
Additional  sources  of,  149. 
A  first  charge  on  industry,  199. 
Property  income,  a  tax  on  industry,  161. 

and  business  stability,  in. 

corporation  accounting,  113. 
organized  industry,  112. 
service  income,  18. 

Distinguished,  26. 
the  Feudal  System,  167. 
unemployment,  160. 
as  a  return  for  power,  194. 
royalty  charge,  161. 
tax,  198. 
Basis  for  computing,  133. 

Business  receipts,  134. 
Difficultiesin  determining,  135. 
Net  income,  135. 
in  the  United  States,  128. 
permanence  of,  165. 
Computation  of,  120. 

corporation  tax  returns,  138. 
Corporations,  112. 
Defined,  17. 

Development  of  with  large  fortunes,  168. 
Difficulties  in  ascertaining,  108. 
Distinguished  from  service  income,  17. 
Dividend  payments,  detailed  estimate  of,  146. 
Estimates  of  dividend  payments,  141. 
Facts,  Accuracy  of,  132. 
General  summary  of,  151. 
Immortality  of,  167. 
Impersonal  nature  of,  53,  108. 
Interest  as  a  fixed  charge,  160. 
Methods  of  computing  total  payments,  137. 
New  data  on,  no. 
Possibilities  of,  119. 


232  INDEX 

Property  income,  Possibilities  of,  Estimated,  126. 
Possible  and  actual,  119. 
Prerogatives  of,  159. 
Priority  of,  159. 
Permanence  of,  165. 

and  corporate  organization,  166. 

land  values,  165. 
Question  regarding,  109. 
Right  to,  187. 
Royalty  Nature  of,  161. 
Sources  of  estimated,  149. 
Stability  of,  162. 
Stability  of  compared  with  service  income,  162, 184. 

in  railroad  properties,  163. 
Stocks  and  bonds  as  measures  of,  114. 
Superior  right  to,  185. 
Tendency  to  concentrate,  168. 
Tendency  to  increase,  199. 
The  courts  and,  189. 
The  government  and,  188. 
Totals  of,  summarized,  152. 
Variations  in,  132. 
interests,  Demands  of,  197. 
owners,  Power  of,  194. 
ownership,  an  open  sesame  to  income,  196. 
And  income,  18. 
service,  22. 

As  a  source  of  income,  24. 
Claims  of  and  income,  161. 
Results  of  concentration,  193. 
Spirit  of,  193. 
Taxing  power  of,  198. 
Sacredness  of  and  income  distribution,  116. 
Property-service  contrast,  Validity  of,  154. 
Property,  Total  value  of  in  the  United  States,  122. 
valuation,  Measures  of,  114. 
values,  Increase  of  total,  157. 

Total  of,  121. 
yielding  income,  131. 


INDEX  233 

Psychic  income,  xii,  xiii. 
Public  debt,  Total  of,  126. 
Purchasing  power  as  income,  xviii. 

Limitations  on  the  term,  rri. 

Railroads,  Financial  statistics  of,  33. 

Salaries  of  officers,  71. 

Service  and  property  income,  31. 
Railway  employees,  Totals  of,  218. 
Recipients  of  service  income  classified,  60. 
Rent  and  income,  9. 
Rent,  Monopoly  power  and,  15. 
Right  to  work,  and  property  income,  186. 

Salaried  employees,  Ratio  of  to  wage-earners,  70. 
Salaries  and  wages,  Distribution  in  organized  industry,  70. 
Figures  on,  71. 
Of  clerks,  78. 

Proportion  of  service  income  devoted  to,  74. 
Ratio  of  to  wages,  73. 
Scarcity  as  an  element  in  income,  13. 
Monopoly  power  due  to,  13. 
Service  and  income,  18. 

property  income  and  corporate  organization,  115. 

securities,  115. 

increasing  property  values,  157. 
the  rising  interest  rate,  158. 
Conflict  between,  190. 
Express  business,  36. 
In  iron  and  steel  business,  41. 
In  manufacturing  industries,  40. 
In  municipal  utilities,  38. 
In  transportation  agencies,  30. 
Mining,  smelting  and  refining,  48. 
Narrow  distinction  between,  24. 
Railroads,  31. 

Summary  of,  United  States  Steel  Cor- 
poration, 219. 
Telegraph  and  telephone,  36. 


234  INDEX 

Service  and  property  income,  Validity  of  the  contract,  154. 

Summary  of,  51. 
as  a  source  of  income,  24. 
versus  property  ownership,  22. 
income,  24, 

American  railroads,  209. 

And  business  accounting,  177. 

And  gainful  occupations,  54. 

And  occupations,  53. 

And  property  income,  18. 

And  property  income  distinguished,  26. 

And  the  position  of  the  producers,  1 70. 

Business  accounting  applied  to,  179. 

Coal  mining,  103. 

Comparison  of  with  living  standards,  1 76. 

Denned,  17. 

Distinguished  from  property  income,  17. 

Economic  inadequacy  of,  177. 

Economic  inadequacy  of,  summarized,  181. 

Fair  standards  of  living,  cost  of,  175. 

Females,  California,  208. 

In  retail  stores,  210. 
Kansas,  207. 
Massachusetts,  205. 
New  York,  206. 
Oklahoma,  206. 
Selected  industries,  204. 
Wisconsin,  207. 
For  classes  of  industries,  61. 
General  officers,  73. 

Salaries  of,  73. 
Grouping  of  recipients,  68. 
Instability  of,  184. 
Males,  California,  215,  216. 
Kansas,  214. 
Massachusetts,  212. 
New  Jersey,  213. 
Oklahoma,  214. 
Selected  industries,  203. 


INDEX  235 

Service  income,  Males,  Wisconsin,  215. 

Menace  of  to  the  unskilled  worker,  184. 

One-man  industry,  61. 

Organized  industry,  relation  of  to  other  industries,  68. 

Summarized,  105. 
Paucity  of,  172. 
Personal  nature  of,  53. 
Proportion  devoted  to  salaries,  74. 
Ratio  of  to  industrial  values,  Massachusetts,  221. 
Recipients  of,  classified,  60. 
Relation  of  to  living  wages,  174. 
Right  to  compare  with  property  income,  187. 
Rigidity  of,  181. 
Salaries  of  officers,  71. 
Social  inadequacy  of,  176. 
Social  insufficiency  of,  173. 
Subordinate  officers,  75. 
Summary  of,  173. 
Totals  of,  129. 

United  States  Steel  Corporation,  220. 
Wage-earners,  glass  industry,  95. 

In  certain  States,  98. 

Iron  and  steel  industry,  89. 

Meat-packing  industry,  96. 

Mercantile  industry,  86. 

Mines  and  quarries,  102. 

Organized  industry,  105. 

Paper  industry,  94. 

Public  utilities,  101. 

Special  manufacturing  industries,  88. 

Textile  industries,  91. 

Transportation  and  commerce,  82. 
Wage-salary  payments,  prevalence,  59. 
Study,  possibilities  of,  67. 
Incomes  of  clerks,  78. 

Summarized,  81. 
Sharers  in  distribution,  17. 
Smart,  William,  Quoted,  xv. 
Social  inadequacy  of  service  income,  176. 


236  INDEX 

Sources  of  income,  4. 

Illustrated,  6. 

Spahr,  Charles  B.,  Quoted,  29. 
Standard  of  living  and  service  income,  174. 

Cost  of  a  decent,  175. 
Standards  and  income,  xxi. 
Stocks  and  property  income,  114. 
Streightoff,  F.  H.,  Quoted,  29. 

Taxing  power,  Property  values  and,  161. 
Telegraph  and  telephone,  service  and  property  income,  36. 
Telephones  and  telegraph,  Service  and  property  income,  36. 
Terminal  railway  companies,  Service  and  property  income,  37. 
Total  income,  Division  of  into  service  and  property  income,  154. 
Transportation,  Service  and  property  income,  38. 

Under  officers,  Incomes  of,  75. 

Unemployment,  and  service  income  stability,  185. 

United  States  Steel  Corporation,  Total  expenditures  for  wages  and 

salaries,  220. 
Unmeasured  income,  xiv. 

Valuation,  Farm,  stability  of,  118. 

Wage-earners  and  salaried  employees,  70. 

Importance  of  in  income  discussion,  75. 
Incomes  of,  glass  industry,  95. 

In  certain  States,  98. 

Iron  and  steel  industry,  89. 

Meat-packing  industry,  96. 

Mines  and  quarries,  102. 

Paper  industry,  94. 

Public  utilities,  101. 

Special  manufacturing  industries,  88. 

Textile  industries,  91. 

Transportation  and  commerce,  82. 
Mercantile  industry,  86. 

Numbers  of  employed  in  industrial  establishments,  217. 
Organized  industry,  105. 


INDEX  237 


Wage  facts,  Summary  of,  organized  industry,  106. 
Rates,  Females,  California,  208. 
Kansas,  207. 
Massachusetts,  205. 
New  Jersey,  206. 
Oklahoma,  206. 
Selected  industries,  204. 
Wisconsin,  207. 
Glass  industry,  95. 
In  certain  States,  98. 
Iron  and  steel  industry,  89. 
Males,  California,  215,  216. 

For  selected  industries,  203. 
Kansas,  214. 
Massachusetts,  212. 
New  Jersey,  213. 
Oklahoma,  214. 
Wisconsin,  215. 
Meat-packing  industry,  96. 
Mercantile  industry,  86. 
Mines  and  quarries,  102. 
Organized  industry,  105. 
Organized  industry,  summarized,  105. 
Paper  industry,  94. 
Public  utilities,  101. 
Special  manufacturing  industries,  88. 
Textile  industries,  91. 
Lawrence,  211. 

Transportation  and  commerce,  82. 
Wage-salary  relation,  Prevalence  of,  59. 
Wages.    See  Wage  Rates, 
and  income,  xxi. 

Average  for  American  railroads,  209. 
Coal  mining,  103. 
Manufacturing,  summarized,  100. 
Ratio  of  to  salary,  73. 
Wages,  Variation  in  mining  industries,  104. 
Wants  and  income,  xi. 
Wealth,  Census  classification  of,  122. 


238  INDEX 

Wealth,  Concentration  of,  effects  on  public  opinion,  193. 

Corporate,  123. 

Distribution  of,  estimates,  169. 

Tendency  to  concentrate,  168. 

Total  of  for  United  States,  121. 
Workers,  Classes  of,  organized  industry,  64. 

Position  of,  and  property  income,  aoo. 


Printed  in  the  United  States  of  America. 


'"pHE  following  pages  contain  advertisements  of 
Macmillan  books  by  the  same  author,  and  books 
of  related  interest. 


Social  Religion 

BY  SCOTT  NEARING 

Cloth,  ismo,  $1.00 

There  is  no  more  popular  writer  on  present  day  social 
problems  than  Scott  Nearing.  Dr.  Nearing  has  a  way  of 
expressing  his  statements  that  makes  an  irresistible  appeal 
to  the  general  reader,  and  the  interest  is  held  by  the  im- 
portance and  absolute  authoritativeness  of  the  facts  and 
the  inspiring  sincerity  of  the  writer.  In  his  new  book  he 
takes  up  the  more  deplorable  elements  hi  the  modern 
social  and  industrial  world,  analyzing  them  in  the  light 
of  a  practical  Christianity.  The  church-going  public,  the 
non-church-goers  and  those  who  are  openly  opposed  to 
the  methods  of  the  church,  will  find  this  book  interesting 
and  a  significant  contribution  to  the  great  social  move- 
ments of  to-day. 

Dr.  Nearing's  final  presentation  of  a  religion  that  is 
really  social,  a  religion  the  function  of  which  is  "to  abolish 
ignorance  and  to  provide  for  normal  manhood  and  ad- 
justed life  toward  which  society  may  strive"  is  particularly 
inspiring. 


THE  MACMILLAN  COMPANY 

Publishers        64-66  Fifth  Avenue        New  York 


Woman  and  Social  Progress 

A  Discussion  of  the  Biologic,  Domestic,  Industrial,  and  Social  Possi- 
bilities of  American  Women 

BY  SCOTT  NEARING  AND  NELLIE  M.  S.  NEARING 

Cloth,  $1.50 

In  this  discussion  of  Woman  and  Social  Progress,  the  authors 
are  not  at  all  concerned  with  the  relations  of  woman's  capacity  to 
man's,  but  with  the  relation  of  her  capacity  to  her  opportunities 
and  to  her  achievement.  The  biologic,  domestic,  industrial,  and  social 
possibilities  of  American  women  are  discussed  at  length.  The  work 
proves  that  women  have  capacity,  and  that  it  matters  not  a  whit 
whether  that  capacity  be  equal  to  man's,  inferior,  or  superior.  If 
women  have  capacity,  if  they  are  capable  of  achievement,  then  they 
can,  as  individuals,  play  a  part  in  the  drama  of  life.  The  world 
abounds  in  work,  a  great  deal  of  which  will  not  be  done  at  all  unless 
it  is  done  by  women.  If  it  can  be  shown  that  women  have  capacity 
for  work,  every  relation  of  social  justice  and  every  need  of  social  prog- 
ress demand  that  this  opportunity  and  this  capacity  be  correlated 
in  such  a  manner  as  to  insure  women's  achievements.  These  are  the 
theses  which  are  proposed  in  the  early  chapters  of  the  work.  Suc- 
ceeding chapters  contain  the  solution,  viz.:  that  women's  capacity, 
if  combined  with  opportunity,  will  necessarily  result  in  achievement; 
that  therefore  they  should  take  their  places  as  individuals  in  the  van- 
guard of  an  advancing  civilization. 

PRESS  COMMENTS 

"The  authors  cover  well  nigh  the  whole  field  of  modern  oppor- 
tunity, and  they  do  it  in  a  style  so  lucid  and  in  a  manner  so  persua- 
sive as  to  insure  the  sustained  attention  of  the  reader. — The  Argonaut. 

"A  book  which,  from  the  importance  of  its  subject,  and  by  virtue 
of  its  sound  thought  and  worthy  expression,  ought  to  be  in  the  hands 
of  every  intelligent  woman  in  the  land." — Independent. 


THE  MACMILLAN  COMPANY 

Publishers      64-66  Fifth  Avenue     New  York 


BY  SCOTT  NEARING,  PH.D. 

Of  the  Wharton  School,  University  of  Pennsylvania 

Social  Adjustment 

Cloth,  377  pages,  $1.50 

"It  is  a  good  book,  and  will  help  any  one  interested  in  the  study 
of  present  social  problems." — Christian  Standard. 

"A  clear,  sane  gathering  together  of  the  sociological  dicta  of  to- 
day. Its  range  is  wide — education,  wages,  distribution  and  housing 
of  population,  conditions  of  women,  home  decadence,  tenure  of 
working  life  and  causes  of  distress,  child  labor,  unemployment,  and 
remedial  methods.  A  capital  reading  book  for  the  million,  a  text- 
book for  church  and  school,  and  a  companion  for  the  economist  at 
the  study  desk." — Book  News  Monthly. 

Wages  in  the  United  States 

Cloth,  i2mo,  $1.25 

This  work  represents  an  examination  of  statistics  offered  by  various 
states  and  industries  in  an  effort  to  determine  the  average  wage  in  the 
United  States.  As  a  scholarly  and  yet  simple  statement  it  is  a  valu- 
able contribution  to  the  study  of  one  side  of  our  social  organization. 

Economics 

BY  SCOTT  NEARING  AND  FRANK  D.  WATSON 

Both  Instructors  in  Political  Economy  in  the  Wharton  School  of 
Finance  and  Commerce,  University  of  Pennsylvania 

Cloth,  8vo,  493  pages,  $1.90 

This  book  discusses  the  whole  subject  of  prosperity  of  the  factors 
which  enter  into  the  complex  economic  life  of  the  nation.  A  young 
man  who  wishes  to  read  even  the  daily  paper  with  full  intelligence 
would  find  time  spent  in  reading  this  book  well  employed  for  the  help 
which  it  would  give  him  hi  understanding  current  discussions  of 
such  topics  as  the  standard  of  living;  the  natural  resources  of  the 
country  and  their  conservation;  the  relations  of  labor  and  immigra- 
tion; of  the  labor  of  women  and  children  to  industrial  progress;  of 
organization  in  business  and  its  tendencies;  of  the  growth  and  func- 
tions of  large  corporations;  of  public  ownership;  of  the  various  experi- 
ments which  have  been  tried  at  different  times,  or  the  programmes 
which  social  leaders  are  now  proposing  for  the  remedy  or  the  pre- 
vention of  economic  injustice. 


THE  MACMILLAN  COMPANY 

Publishers     64-66  Fifth  Avenue     New  York 


The  Purchasing  Power  of  Money 

BY  IRVING  FISHER 

A  Study  of  the  Causes  Determining  the  General  Level  of  Prices. 

An  Explanation  of  the  Rise  in  the  Cost  of  Living  between 

1896  and  1911 

New  Edition.    Cloth,  8w,  505  pages,  $2.25 

"The  book  is  a  logical,  clear-cut  and  incisive  study  of  the  facts 
and  principles  of  a  question  affecting  the  welfare  of  men,  and  it  is 
not  too  much  to  say  that  it  is  a  distinct  contribution  to  economic 
literature.  Certainly  no  student  or  reader  in  the  field  of  economics 
can  afford  to  pass  it  by  unread." — Boston  Evening  Transcript. 

"A  notably  original  and  suggestive  study  of  the  causes  which  bring 
about  periodic  changes  in  the  level  of  prices." — New  York  Sun. 

"Professor  Fisher  shirks  nothing,  and  his  book,  with  its  thorough 
discussion  and  its  full  appendices  containing  reference  tables  and 
complicated  calculations,  is  adapted  to  the  needs  of  the  careful  and 
patient  student  of  political  economy." — Daily  News. 

"One  of  the  most  important  economic  works  of  recent  years." — 
Moody's  Magazine. 

''In  connection  with  the  recent  talk  of  gold  production  as  the  cause 
of  high  prices — there  is  much  of  value  and  illumination  in  this  well- 
reasoned,  scientific,  yet  readable  work." — Record  Herald. 


THE  MACMILLAN  COMPANY 

Publishers      64-66  Fifth  Avenue     New  York 


The  Income  Tax 

BY  EDWIN  R.  A.  SELIGMAN,  LL.D. 

McVickar  Professor  of  Political  Economy,  Columbia  University. 

Author  of  "Essays  in  Taxation,"  "Shifting  and  Incidence 

of  Taxation,"  etc. 

Second  Edition,  Revised  and  Enlarged.   Cloth,  8vo,  $3.00 

"The  book  is  a  credit  to  American  scholarship  in  that  it  is  the  best 
book  on  the  subject  in  any  language.  An  intelligent  and  just  system 
of  taxation  is  the  need  of  modern  democracy,  and  this  book  shows 
some  of  the  steps  to  be  taken  in  the  right  direction." — Boston  Evening 
Transcript. 

"Standing  as  one  of  the  greatest  productions  in  the  realm  of  public 
finance,  this  volume  is  worth  the  serious  perusal  of  every  student 
and  every  business  man.  To  those  who  wish  an  impartial  and  scien- 
tific presentation  of  a  great  question,  this  volume  is  undoubtedly 
the  best  one  in  the  field.  It  should  be  read  carefully,  and  perhaps 
supplemented  by  other  works,  but  a  careful  reading  will  give  a  great 
fund  of  information  to  any  person.  It  should  be  a  part  of  the  library 
of  serious-minded  students  or  business  men." — United  Banker. 

i 

"It  is  a  valuable  handbook  for  legislators  and  all  concerned  in 

public  administration." — North  American. 

"A  particularly  timely  volume  which  will  be  eagerly  seized  upon 
by  all  those  who  are  desirous  of  obtaining  the  most  authoritative 
information  upon  this  much-mooted  question." — Dtduth  Evening 
Herald. 


THE  MACMILLAN  COMPANY 

Publishers        64-66  Fifth  Avenue        New  York 


American  Social  Progress  Series 

Edited  by 
PROFESSOR  SAMUEL  McCUNE  LINDSAY,  PH.D.,  LL.D., 

Columbia  University 

A  series  of  handbooks  for  the  student  and  general  reader,  giving  the 
results  of  the  newer  social  thought  and  of  the  recent  scientific  inves- 
tigations of  the  facts  of  American  social  life  and  institutions.  Each 
volume  about  200  pages. 

i — The  Juvenile  Court  and  the  Community. 

BY  THOMAS  D.  ELIOT,  PH.D. 

Price  $1.25 

2 — The  New  Basis  of  Civilization. 

BY  SIMON  N.  PATTEN,  PH.D.,  LL.D., 
University  of  Pennsylvania 

Price,  $1.00 
3 — Standards  of  Public  Morality. 

BY  ARTHUR  TWINING  HADLEY,  PH.D.,  LL.D., 
President  of  Yale  University 

Price,  $1.00 
4— Misery  and  Its  Causes. 

BY  EDWARD  T.  DEVINE,  PH.D.,  LL.D.,  Columbia  University 

Price,  $1.25 

5— Government  Action  for  Social  Welfare. 

BY  JEREMIAH  W.  JENKS,  PH.D.,  LL.D.,  Cornell  University 

Price,  $1.00 

6 — Social  Insurance. 

A  Program  of  Social  Reform.    BY  HENRY  ROGERS 
SEAGER,  PH.D.,  Columbia  University 

Price,  $1.00 

7— The  Social  Basis  of  Religion. 

BY  SIMON  N.  PATTEN,  PH.D.,  LL.D., 

University  of  Pennsylvania 

Price,  $1.25 

8 — Social  Reform  and  the  Constitution. 

BY  FRANK  J.  GOODNOW,  LL.D.,  Columbia  University 

Cloth,  izrno,  $1.50 

9— The  Church  and  Society. 

BY  R.  FULTON  CUTTING  Price  $1.25 


THE  MACMILLAN  COMPANY 

Publishers     64-66  Fifth  Avenue    New  York 


• 


DATE  DUE 


PRINTED  IN  U.S.A. 


